After the automated collection
system starts on an individual
to
collect back taxes,
they will begin receiving a series
of notices from the IRS. These notices
consist of an initial assessment
for back taxes owed plus any penalties
and interest.
The assessment notice
is followed up by a series
of CP-500 letters (CP 501-504).
When these letters start they come
off in a very none threatening manner,
each additional letter you receive
will become a bit more
intimidating.
After receiving your CP 504 you will
receive a notice of
federal tax
lien (N
FTL) and this is where IRS
collections will begin.
The
process typically takes place in a
period of 4 to 6 months from the first
assessment letter to the notice
of federal tax lien. It is best to
settle back taxes before you receive
a NFTL because this will hurt your
credit and make many financial problems
for you to deal with.
Once the
IRS realizes that an
individual has outstanding back
taxes they begin the automated collection
system procedure. Understanding the basics
of how this system works can allow
individuals to delay the IRS tax
collection process and buy more time to
get the money together and pay any back taxes owed, while
slowing interest and penalties.
You can gain more time from
the IRS without additional
penalties by simply asking in
some situations. When you receive your
assessment letter or any of the
following CP letters you can simply
reply to the letter stating that
you cannot pay at the current time
and you would like an additional
45 days. No
excuses are needed, just simply ask and the
majority of the time they will grant
it to you.
Once you get a 45
day extension, someone in the IRS will input
a freeze code into the computer
that will halt the collection system
for 45 days. If you do not pay within
this period it will restart the
collections process where it left off.
When you receive another letter, you
can do the same thing again. This time
it is best to send in a little bit of
money to show that you are trying to
pay. By asking for extensions this will
buy you several more months to pay off
outstanding back taxes. In some cases because of
the inefficiency of the IRS it can
buy more than a year's time.
For
more time in order to settle your
back taxes, it is a good idea to
set up a payment plan with the IRS.
The most typical plan is an installment
agreement. The IRS has many settlement
methods they allow, if you want
to settle your taxes for less than
you owe it is best to consult a
tax professional to see if you would
qualify.
Find a
back
tax specialist agent through
our site here if help is what
you need.
