Whether you have just learned that you owe money to the IRS, or have had a lingering tax problem for many years, in this article we will explain the three phases of the IRS collection process.
The three slow phases of the IRS collections process
One of the first things to note is that the IRS moves slowly. This is unfortunate, as the delays the IRS has in collecting debt can encourage taxpayers to continue to incur additional liabilities. You may think it impossible but it is not: You can go years of owing the IRS hundreds of thousands of dollars before the IRS does anything (besides send letters) about it (Note: I am not advising you go 10 years of owing the IRS back taxes, I am just stating that it is possible).
The IRS uses a three-phase strategy for collecting unpaid tax liabilities until they are either full paid, determined to be uncollectible, or otherwise resolved. Each phase is worked by different program office and with IRS employees with increasingly higher technical skills.
First Step of the IRS Collection process: The "Notice Stream"
"The Notice Stream" is a letter campaign the IRS is legally required to send you. They use a preset number of automatically generated IRS balance due notices that are sent to taxpayers to prompt replies or payments. The notice stream begins with the issuance of the statutory notice, followed by up to three reminder notices if the back tax debt remains unpaid. Some of the common forms are CP501, CP504, and Final Notice of Intent to Levy along with a Notice of Federal Tax Lien.
Some of these notices are certified, some are not. These forms are intended to scare you into entering into some repayment agreement with little administrative cost to the IRS. However, care must be taken not to agree to a collection alternative that you just can't keep — as the IRS tends to look at those who default agreements harshly.
If that doesn't work: the second step: Automated Collection System (ACS)
The IRS says this about ACS:
"ACS is a critical part of the IRS’s overall Collection program and plays a vital role in securing and protecting the revenue of the United States. Its work with delinquent taxpayers is a major factor in determining the IRS’s success in meeting the Collection program’s mission, which is:
To collect delinquent taxes and secure delinquent tax returns through the fair and equitable application of the tax laws, including the use of enforcement tools when appropriate, provide education to customers to enable future compliance, and thereby protect and promote public confidence in the American tax system."
That's what the IRS says. Yet there are some robust details they are missing.
The IRS calls ACS employees "IRS Contact Representatives." IRS Contact Representatives do the "dirty work" of collecting unpaid taxes and securing tax returns from delinquent taxpayers who have not complied with previous notices of the Notice Stream. Contact Representatives take enforcement actions on taxpayers to prompt replies or payments from them. Enforcement actions may include levying financial assets or filing liens against property — but sometimes, ACS does this automatically (hence the "A" in the Automated Collection System).
IRS Contact Representatives also answer telephone calls from taxpayers (after horribly long hold times caused, in part by a 36% reduction in ACS' size since 2010). Here's the deal: ACS employees tend to be inflexible. The IRS ACS Contact Representatives have very specific criteria to abide by. This is why it is important to exercise any IRS Appeals rights you may still have, or even request that a Collection Field office assign a Revenue Officer. Yes — there are times when it is better to get close and personal with an IRS Revenue Officer than be sent into a concentric ring of hell with ACS.
ACS call centers
ACS has 15 call sites in the country. There are split up into two types of divisions based upon what type of taxpayer they are primarily dealing with.
- ACS Small Business/Self-Employed (SB/SE) Handles back taxes and returns owed by small businesses and the self-employed
- ACS Wage and Investment (W&I) —Handles taxes owed by W-2 wage earners and those with investment income
The SB/SE and W&I Divisions also have a total of five ACS support sites that support the call sites by resolving written correspondence from taxpayers, taxpayer representatives, and/or third-party contacts. Visit your local library or look at this handy chart below to learn more, but mostly look at the handy chart below:
There are far many more IRS field collections offices across the country, but you'll find ACS centers in Fresno, Brookhaven (Long Island), Nashville, Jacksonville, Atlanta, Kansas City, Buffalo, Austin, Seattle, Puerto Rico Cincinnati, Philadelphia, Oakland Denver, and Des Moines.
If that doesn't work… the "Collection Field function," or CFf
"CFf" is the IRS' way of saying a real live Revenue Officer will come by and pay you a personal visit and have a sit down with you over your taxes. Their first contact is always attempted in person. So, (1) ignore "calls" from people posing as IRS agents, and (2) don't think your Revenue Officer is giving you special attention because they came to your home, place of business or even your country club. This is, unfortunately, a Revenue Officer's job.
Notable exceptions to the IRS collection process
- Very common: If you run up a payroll tax debt, ACS may send you some notices, more than likely no "IRS Contact Representative" will ever discuss your case. You will likely get an immediate escalation to the "queue" for a Revenue Officer's "inventory" at a Field Collection Office.
- If you are under a Grand Jury or other investigation (there are around 3,000 indictments a year for tax evasion), do not expect the IRS to follow these procedures, but rather Federal Criminal Procedure (or more precisely, they will follow these collection procedures, depending on the outcome of the criminal matter)
- For enforcement of non-tax related fines and penalties, like FBAR (Form 114) penalties, the IRS collections procedures do not apply; an FBAR collections process is something else entirely, although ACS will send you notices of intent to offset FBAR penalties from any tax refunds owed to you, and ACS does have the ability to make those offsets.
- For really "interesting" collection cases, the entire process may be elevated. The highest ranking Revenue officer, a GS-13, can get assigned to a case and is looking to make jeopardy assessments, and file jeopardy liens (like they did to Al Sharpton) and jeopardy levies.