If you’re a taxpayer with a tax balance due, keep in mind that the IRS has resumed specific tax debt collection and enforcement processes suspended due to COVID-19. In April 2020, the IRS temporarily stopped its tax levy programs as part of the Federal Government’s pandemic relief program. However, the IRS resumed its normal tax debt collection processes on June 15, 2021.
What Notices Will the IRS Send Me If I Have a Tax Balance Due?
As of June 15, 2021, the IRS started reaching out to taxpayers who had not responded to previous tax balance due notices. The follow-up notifications give taxpayers 30 days (45 days if out of the country) to respond or pay their tax bills. If you ignore the additional tax balance due notices, you face being issued levies or Notice of Federal Tax Lien filings by August 15, 2021. Some of the notices that the IRS sends when you have a tax balance due include:
- Balance Due Notices: The first balance due notice or CP501 is sent to taxpayers to inform them that they have a tax balance due. The notice contains information on how to contact the IRS regarding the tax debt and states how much is due. Other tax balance due notices include CP503 (you haven’t responded or settled your tax debt) and CP504 (the IRS intends to levy). You’ll also receive a CP508C if the IRS certifies your tax debt as seriously delinquent.
- Federal Tax Liens: If you don’t settle your tax debt after several tax balance due reminders, a federal tax lien gives the IRS a legal right to seize your property in order to cover your tax debt. Property includes financial assets, real estate, and personal property.
What Are the Programs That the IRS Will Use to Levy Taxpayer Assets?
As of July 15, 2021, the IRS will start levying taxpayers who have overdue taxes assets through the following programs:
- Federal Payment Levy Program (FPLP): The IRS can leverage the FPLP to intercept payments from the government to a taxpayer with overdue taxes. These payments, typically made through the Bureau of Fiscal Service (BFS), include some Social Security benefits and Medicare payments to providers or suppliers. They may also include payments to federal contractors, retirement annuities for federal employees, military retirement benefits, and some federal employee salaries.
- Municipal Tax Levy Program (MTLP): The IRS can intercept any refund you receive for the municipal or city income taxes. However, before they do so, the IRS will first send a notice to inform you of your right to contest the levy.
- State Income Tax Levy Program (SITLP): The SITLP empowers the IRS to intercept a taxpayer’s state income tax refunds. However, if you receive a notice that your state income tax refund is being seized, you have an option to appeal the levy.
- Passport revocation: The IRS can also certify to the Department of State (DOS) that you have a seriously delinquent tax debt. The DOS can act on the notification by revoking your passport until your tax debt is settled.
How Many Days Do I Have to Respond and Pay My Tax Debt?
The letter or notice of tax balance due from the IRS provides reasons you’re being contacted and gives you instructions on how to resolve your tax issue. The letter or notice may also require a response by a specific date, usually 30 days. There are two main reasons why you should respond within the provided timeline:
- To protect your right to appeal if you disagree with the tax due amount
- To reduce tax penalty charges and additional interest
If you can’t pay your full tax debt to the IRS, you have the following tax relief options:
- Offer in Compromise (OIC): Offer in compromise is a program that gives you an option to settle your tax debt for less than the full amount owed. The IRS can approve your Offer in Compromise if the amount offered represents the most they can expect to collect within a reasonable period.
- Hardship Status: You can also petition for “Currently Not Collectible (CNC)” if it’s challenging to meet your tax obligations or if you can’t make payments due to an ongoing financial situation.
- IRS Payment Plans (Installment Agreements): You can request a favorable payment agreement with the IRS that allows you to pay off the tax debt in manageable monthly installments.
How Can Wiztax Help?
If you owe taxes this year and/or for previous year(s) and you’re unable to pay off your full tax debt, Wiztax will help you solve your tax issue. We provide an all-inclusive Wiztax Solution Plan that includes all-inclusive pricing with no hidden fees, 100% Satisfaction Guarantee (cancel anytime), Offer in Compromise, Hardship Status, IRS Payment Plans, IRS Notices Support, Audit Protection, and more. Call us today at (866) 568-4593 to learn more, or start here.
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