Delaying IRS Back Tax Collections
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.