Collection and Payment Alternatives

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What is the collection process?

If you do not pay the taxes you owe in full when you file your income tax return, or if the IRS examines your tax return and makes an assessment based upon an examination, you will receive a bill from the IRS. This bill begins the collection process. The IRS may take action to collect the money if you do not pay on time or do not make arrangements with the IRS to pay over time.

The first bill you receive will request payment in full. If the IRS has changed the amount you owe, the bill will explain the change.

It is in your best interest to pay the tax as soon as possible because the IRS will continue to charge you penalty and interest. If you cannot pay the full amount of taxes you owe by the deadline, you should still file your return by the deadline and pay as much as you can to reduce penalties and interest.

How can I pay my taxes?

1. Check or money order made out to the Department of Treasury – write your Social Security number or ITIN, the tax form, and tax period on the check.
2. Electronic Federal Tax Payment System (EFTPS) – EFTPS is a free tax payment system. You can transfer money from your bank account to pay your taxes by phone or online. For details, visit www.eftps.gov or call 1-800-316-6541.
3. Credit Card – these companies charge finance fees. To pay by credit card, contact one of the following service providers:
   • Link2Gov Corporation: 1-888-PAY-1040 (1-888-729-1040), www.pay1040.com.
   • Official Payments Corporation: 1-800-2PAY-TAX (1-800-272-9829), www.officialpayments.com.

What if I cannot pay in full?

Call the IRS at the phone number listed on your bill. Depending on your specific circumstances, you may qualify for an extension or an installment agreement.

1. Extension of Time to Pay – You can request an extension from 30 – 120 days depending on your specific situation.
2. Installment Agreement or Partial Pay Installment Agreement – Depending on the amount you owe , and your specific circumstances, you may apply for an installment payment plan or a partial pay installment agreement by:
   • Attaching a Form 9465, Installment Agreement Request, to the front of your return,
   • Contacting the IRS by telephone,
   • Applying online at www.irs.gov, or
   • Visiting a local Taxpayer Assistance Center. Find a location in your state at www.irs.gov.

For most taxpayers, the IRS generally charges a fee for setting up an installment agreement and interest and penalties continue to accrue during this time.

What if I cannot pay at all?

Call the IRS at the phone number on your bill. Because you will need to give the IRS complete financial information if you feel you cannot pay, before you call, make a list of your monthly expenses and monthly income, and be prepared to discuss those with the IRS. Be sure to consider your medical costs and transportation costs (e.g., gas, repairs, insurance, bus fares), as well as housing costs. For expenses that are not recurring on a monthly basis (like auto repairs), consider your total yearly costs and divide that amount by 12 to come up with an average monthly amount. If the IRS agrees that you do not have the ability to pay, it may temporarily suspend collection action. However, the amount you owe will continue to increase through additional penalty and interest charges.

What if I do not pay voluntarily?

If you do not pay your tax bill or contact the IRS to make arrangements to pay, the IRS will take action to collect, such as:

1. Filing a Notice of Federal Tax Lien (NFTL) – The lien is a claim against your property. The lien will appear on your credit report and it may harm your credit rating. The IRS will release the lien once the taxes, penalty, interest, and recording fees are paid in full.
2. Serving a Notice of Levy or seizing assets – The IRS can collect the amount you owe from your wages, bank accounts, Social Security benefits, retirement, or other sources of income. If the tax still isn’t paid and you haven’t made arrangements to pay, the IRS may seize your car, real estate, or other property. Prior to taking such action, you have the opportunity to request a hearing to resolve your tax payment issues.
3. The IRS will also apply any future federal tax refunds that you are due to the debt. They may also take any state income tax refunds you are due.

What if I disagree with the IRS’ Collection Actions?

Depending on where you are in the collection process, you may be able to appeal the IRS collection actions through the Collection Due Process (CDP) or Collection Appeals Programs (CAP). For more information, see Publication 1660, Collection Appeal Rights. All Publications are available by calling 1-800-829-3676, or at www.irs.gov.

Will the IRS settle for less than full payment?

The IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax liability. For most taxpayers, there is a fee for submitting a request for an OIC, and the IRS will generally not accept an OIC if you can fully pay the tax liability. For more information about OICs, see Publication 594, What You Should Know About The IRS Collection Process.

Where can I find more information about paying my taxes?

See IRS Publication 17, Your Federal Income Tax, for more information.

Whom should I contact if I need assistance?

If you have additional questions or concerns, contact the IRS at the phone numbers listed on your bill. If you do not have a bill, you can call IRS customer service at:

• 1-800-829-1040, or
• Visit the IRS website at www.irs.gov
• Taxpayer Assistance Center. Use this link to locate the closest IRS Taxpayer Assistance Center or visit www.irs.gov for a listing.
• You may also qualify for assistance from a Low Income Taxpayer Clinic (LITC).Information about LITCs can be found later in this toolkit.

For more information, visit the Tax Videos section of this site.