The IRS is one of the organizations with the highest client base, given that all American citizens pay taxes to the authority. The IRS makes millions of correspondences to taxpayers and therefore, needs to have an efficient way of making such communications. For tax collections, most of the process is automated, with IRS staff only coming in when the automated process fails to make a collection. This IRS process of tax collection is done in four stages. These stages are explained below:
1. Regional Compliance Centers
When taxpayers file their returns, these forms are received and compiled in the IRS Regional Compliance Centers. There are 10 Regional Compliance Centers where these returns are processed. The tax returns are entered into the processing computer system automatically and the system does preliminary reviews such as confirming entries and checking for mathematical errors. If there are any preliminary mistakes, the system automatically generates a notice to be mailed to the taxpayer.
If there are any taxes due after compiling the tax return, the system also generates a “Request for Payment” letter that is mailed to the taxpayer. The letter indicates the outstanding taxes, penalties and interest that is due and requests the taxpayer to make payment within 10 days of receiving the letter. If no payment is made within this period, the system then generates a second notice referred to as a reminder with the IRS code “501”. If the taxpayer does not clear the arrears within a further 2 weeks, the system then automatically generates a 3rd letter reference “503” titled “Urgent, Immediate action is required”. The letter will have more pressing language and will alert the taxpayer that the tax debt is fallen way past due and the IRS may take more aggressive measures to collect the taxes. If the taxpayer still does not comply, the Compliance Center system will generate a final notice “504” titled “Urgent, We intend to levy on certain assets. Please respond NOW.” The notice explains to the taxpayer that due to his or her non compliance, the IRS will now start seeking alternatives to make collections. After the 504 notice is sent to the taxpayer, the issue is escalated to the ACS for collection.
2. Escalation to the Automated Collection System (ACS)
The Automated Collection System (ACS) is also an automated system that seeks to make collection through telephoning the taxpayer. A telephoning system initiates calls to the taxpayer to inform them of the taxes due and giving the taxpayer a final window to pay the taxes before the IRS starts pursuing personal assets to seize the taxes. If the ACS is unsuccessful to make collections, the system sends a final letter “1058” titled “Final notice, notice of intent to levy and notice of your right to a hearing. Please respond immediately.” A taxpayer has a final right at this stage to appeal to the IRS intent to levy. If the taxpayer appeals, the appeal is held and the taxpayer may make the tax payment. On the other hand, if the taxpayer does not respond to the letter reference 1058, the ACS system initiates the process of placing a levy. The ACS normally has information about most taxpayers’ employment, certificates of deposit, bank account and other personal assets. Six weeks after letter 1058 is sent, the ACS sends a Notice of Levy against such assets to seize the administration of such assets in a bid to have the taxes collected. If the ACS does not have details of the taxpayer’s personal assets, they will refer the case to the local area office for research and collection.
3. Walk-in Resolution by Collection Support Staff
Within the time that the Compliance Centers and the ACS are seeking to collect the taxes, taxpayers may also go to their local IRS offices and resolve their taxes with a Collection Support Staff. The staff can review your account and also provide some short extensions of paying your taxes that is interest free. The staff can also provide you with information as to what to do to resolve your tax issue on a case to case basis.
4. Field Investigation by Revenue Officer
If none of the above three stages of the tax collection is successful, the tax account is forwarded to a Revenue Officer. The officer makes investigations on the ground to resolve the issue. In most cases, the officer is able to resolve the issue and provide a way forward as to the collections on a given account. This is the final stage in the IRS collection process.
