IRS Collections, Liens, and Levies

When a tax bill goes unpaid, the IRS sends a series of notices, adding penalties and interest. Taxpayers who cannot pay in full can usually set up an installment agreement, and those who cannot pay at all may qualify for an offer in compromise, settling for less, or be placed in currently not collectible status. The IRS generally has ten years from assessment to collect a tax debt. Since 2017 it has also assigned some older debts to private collection agencies under a 2015 law.

If a debt remains unpaid, the IRS can file a notice of federal tax lien, a public claim against the taxpayer's property, and after a final notice it can levy, seizing wages, bank accounts, Social Security payments, or property. Taxpayers have a right to a Collection Due Process hearing before the Independent Office of Appeals, and those decisions can be reviewed by the Tax Court. Under a 2015 law the State Department can deny or revoke the passports of people with seriously delinquent tax debts, a threshold set above 60,000 dollars and adjusted for inflation.

Refusing to pay is different from being unable to. Arguments that the income tax is voluntary or unconstitutional have been rejected by courts for decades and can bring a 5,000 dollar penalty for frivolous filings. Willfully failing to file is a misdemeanor, and tax evasion is a felony punishable by up to five years in prison, prosecuted after investigations by IRS Criminal Investigation, whose agents also pursue money laundering and fraud. Al Capone was famously convicted of tax evasion in 1931. Taxpayer advocates say the system can be harsh on people in hardship, while enforcement officials say collection tools are essential to a system that depends on voluntary compliance.