What can the IRS do if I don’t pay my taxes- what is the collections process?

By Jason Watson (Google+)

The IRS can do a variety of things during their collections of unpaid taxes.-

Federal Tax Lien: A legal claim against all your current and future property, such as a house, car, wages, bank accounts, etc.  The IRS uses this to establish their priority in your assets versus other creditors’ claims.

Notice of Federal Tax Lien: This is a searchable public notice to creditors, and will appear during title searches or other credit applications.

Notice of Intent to Levy: Before your property is seized the IRS sends this notice to give you time to arrange for a hearing.

Levy / Seizure: Wages, salary, commissions, bank accounts, Federal payments (up to 15%), house, car or other property can be seized to pay your taxes.  The IRS cannot seize unemployment benefits, necessary schoolbooks and clothing, certain amounts of fuel, provisions, furniture, personal effects, and tools used in a trade, business or profession.  There are also rules on seizure of primary residences, business assets, annuity and pension benefits, service-connected disability payments, workers’ compensation and public assistance payments.  The IRS cannot seize property unless there is an expectation that the proceeds will help pay your tax debt.

The IRS has 10 years to collect unpaid taxes.

Collection proceedings are halted during review of Installment Agreement or Offer in Compromise applications, and if you are living outside of the United States for more than 6 months.

If you attempt to dodge or sidestep the actions of the IRS, they can issue a summons to secure financial information for carrying out their collections.  Not only can you be legally required to appear in front of the IRS, other third parties can be compelled as well.  Everything (banks, investments, property) is tied to your social security number now, and it is pretty easy to track down your stuff and lock it down.