What Should You Do if You Receive an IRS Collection Letter?

What To Do if You Receive an IRS Collection Letter

Receiving a tax collection letter from the Internal Revenue Service (IRS) can be very stressful, especially if you do not feel that you have the funds to repay the debt.

If the IRS determines that you have a delinquent federal tax balance of some kind, it will first attempt to contact you or your representative by telephone or by arranging a field visit. As part of that process, you may receive a collection letter attempting to schedule an interview. The IRS letter may note that you have an unpaid balance and inform you of the IRS’s intent to levy on (seize) your assets. These letters are often confusing and intimidating, but you can minimize your risk by promptly responding with the assistance of legal counsel.  

Do Not Ignore IRS Collection Notices

At the outset, do not ignore or delay in addressing any collection notices that you receive from the IRS. Failure to provide the IRS with your tax return, financial statements, or other requested information will likely result in additional interest and penalties accruing, as well as more forceful collection such as liens, levies, and more. You might also miss key deadlines for contesting the collection action, waiving your right to seek administrative or judicial review.  

Confirm the IRS Notice is Not a Scam

Given the rise in IRS impersonation scams, you should verify the authenticity of the collection letter and any other IRS correspondence. Revenue officers should be able to provide IRS identification. You can also call the Department of Treasury Bureau of Engraving and Printing Police Operations Center at (202) 874-0911, in order to confirm the IRS agent’s identity.  

Explore Options for Resolving IRS Debts

If the collection notice is accurate and you lack the funds to pay the delinquent balance, you still have several options to avoid forceful collection actions. If you have little disposable income, the IRS might agree to an Offer in Compromise (OIC) whereby you pay something less than the total amount owed and the balance is forgiven. And even if your financial situation does not justify an OIC, you can apply for an installment agreement to pay off the full amount over time.  

In certain circumstances, you may also benefit from first-time penalty abatement or currently-not-collectible status. Finally, as the matter unfolds, you might be able to contest a wide variety of collection actions through the Collection Appeals Program (CAP) or through a Collection Due Process (CDP) hearing.  

Consider Working with a Tax Attorney

A tax attorney can help you navigate the collections process and communicate with the IRS. Your lawyer can file a power of attorney with the IRS, which will result in more efficient communications and resolve the matter significantly more quickly. Counsel will also be able to work with you to determine whether the debt is accurate and, if it is not, communicate with the IRS to provide the necessary documentation.  

Given the complex timing and procedural issues at play in this context, tax counsel will be able to assess the relevant factors and determine a strategy for minimizing risk and protecting your rights in the most cost-effective way possible. 

About the Authors

Ryan Gaylord business attorney

Ryan M. Gaylord

Ryan Gaylord's practice primarily focuses on general business law.
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John Cocklereece headshot

John A. Cocklereece, Jr.

John Cocklereece concentrates his practice on property tax appeals, business law, tax controversies, and estate planning and administration.
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