IRS Tax Collection Procedures and Taxpayer Response Options
- Dongwan Chong
- Jun 2
- 3 min read
Updated: Jun 19
The Internal Revenue Service (IRS) has recently intensified its enforcement efforts against high-income individuals and corporations attempting to evade taxes. As a result, the IRS has recovered over $1.3 billion in unpaid taxes as of September 2024.
Each year, the IRS audits less than 1% of all individual tax returns, focusing primarily on statistical anomalies. Common audit triggers include self-employment income, miscellaneous income sources, high income, large charitable contributions, and refundable tax credits.
The likelihood of an IRS audit increases with income. High-income earners, particularly those making over $1 million annually, face significantly higher audit rates. The IRS selects audit targets using statistical analysis and computer screening to detect irregularities or potential errors, and audit priority may vary depending on income level and income type.
Audits are conducted either by mail or through in-person interviews, and the required documentation and procedures vary by audit type.
Correspondence audits involve IRS letters requesting additional documentation for specific items.
In-person audits may take place at an IRS office, the taxpayer’s residence, or place of business.
During the audit, the IRS will request documentation to substantiate income, deductions, and credits reported on the tax return. Only copies (not originals) should be submitted, and mailed documents must be sent to the address specified in the IRS letter.
1. Tax Assessment & Billing
Once a tax return is filed or an audit results in a tax assessment, the IRS will issue official notices:
CP14 / CP501: Initial notice requesting payment
If payment is not made by the due date, the balance becomes delinquent, and collection procedures are initiated.
2. IRS Collection Notices
If the tax remains unpaid, the IRS will send a series of escalating collection notices:
Notice Number | Summary of Content |
CP501 / CP503 | Payment reminder notices |
CP504 | Final notice before levy – informs taxpayer of possible seizure of property or tax refunds |
Letter 11 / LT11 | Notice of Intent to Levy and Your Right to a Hearing – allows 30 days to request a Collection Due Process (CDP) hearing |
3. IRS Collection Actions
The IRS may take the following actions to collect unpaid taxes:
Federal Tax Lien
The IRS files a legal claim against the taxpayer’s property (including real estate) for the unpaid tax debt.
Levy (Asset Seizure)
Includes bank account levies, wage garnishments, and seizure of vehicles or real estate.
Passport restrictions: If the unpaid balance exceeds $62,000 (as of 2025), the IRS may notify the U.S. Department of State to deny or revoke a passport.
4. Resolution Options for Taxpayers
Full Payment – Pay the total amount due in one payment
Installment Agreement – Set up a monthly payment plan
Offer in Compromise (OIC) – Settle the tax debt for less than the full amount if the taxpayer cannot pay in full
Currently Not Collectible (CNC) – Temporary halt in collection due to financial hardship
Bankruptcy – Under specific conditions, tax debt may be discharged through bankruptcy
5. Taxpayer Rights
After receiving LT11, taxpayers have 30 days to request a Collection Due Process (CDP) hearing.
CDP hearings allow taxpayers to challenge IRS liens or levies and receive an independent review. This ensures the taxpayer’s constitutional due process rights are protected before enforcement actions are taken.
6. Tips for Responding to IRS Collections
Never ignore IRS notices
Strictly observe all deadlines listed in the notice and respond promptly
Organize and retain documentation related to income, expenses, and assets
Seek professional tax assistance when needed
Contact: (213) 384-1189 / Email: dwcracpa15@gmail.com
By Douglas Chong, CPA / Former IRS Revenue Agent
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