The IRS collection system is designed to secure overdue returns and collect unpaid taxes using a structured sequence of notices, financial review, and resolution options. Revenue Officers may contact taxpayers directly, review financial information, and consider alternatives when full payment is not possible. (“A revenue officer… collects delinquent unpaid taxes and secures tax returns… can consider alternative means…”)
Revenue Officer Actions
A Revenue Officer may:
- Set_payment_agreements
- Consider_penalty_relief
- Suspend_collection_for_hardship
These actions depend on the taxpayer’s ability to pay and financial condition.
INJURED SPOUSE RELIEF
Injured spouse relief applies when a joint refund is taken to pay the other spouse’s separate debt (federal tax, state tax, child support, or federal non‑tax debt). (“A taxpayer is an injured spouse if… their share of the refund was… applied against the separate past‑due… debt of their spouse.”)
A taxpayer files Form 8379 to recover their share of the refund. It may be filed:
- with the original joint return
- with an amended return
- or by itself later
RELIEF FROM JOINT AND SEVERAL LIABILITY
Joint filers are each fully responsible for the entire tax liability. Relief is available through three programs: (“Married taxpayers are jointly and severally liable… There are three types of relief…”)
- Innocent Spouse Relief
Available when one spouse’s erroneous items caused an understatement and the requesting spouse:
- did not know or have reason to know
- and it would be unfair to hold them liable
Requested using Form 8857.
- Separation of Liability
Available to taxpayers who are divorced, widowed, legally separated, or living apart for 12 months. Only applies to understatements, not underpayments.
- Equitable Relief
Available when tax is correctly reported but unpaid, or when other relief does not apply.
NOTICE OF TAX DUE AND DEMAND FOR PAYMENT
If tax remains unpaid, the IRS issues a Notice of Tax Due and Demand for Payment, which includes tax, penalties, and interest. (“The IRS will send a bill called a Notice of Tax Due and Demand for Payment.”)
Payment can be made by card, EFTPS, check, money order, or cash.
CURRENTLY NOT COLLECTIBLE (CNC)
CNC status temporarily delays collection when the taxpayer cannot pay basic living expenses and tax debt. (“Being currently not collectible doesn’t mean the debt goes away… IRS may temporarily suspend certain collection actions.”)
Key points:
- Debt continues to grow with penalties and interest
- IRS may still file a Notice of Federal Tax Lien
- IRS may require Form 433 to verify hardship
EXTENSION OF TIME TO PAY — UNDUE HARDSHIP
A taxpayer may request extra time to pay if immediate payment would cause undue hardship, using Form 1127. (“Undue hardship… more than an inconvenience… substantial financial loss.”)
Extensions apply to:
- tax shown on a return
- deficiencies after examination
Maximum extension periods:
- 6 months for tax shown on a return
- 18 months for deficiencies (plus possible 12‑month extension)
Interest continues to accrue.
IRS COLLECTION INFORMATION STATEMENT (FORM 433)
Forms 433‑A, 433‑B, and 433‑F document income, expenses, assets, and liabilities. (“Form 433… used to determine how a taxpayer can satisfy an outstanding tax liability.”)
Required for:
- Offers in Compromise (except doubt as to liability)
- Non‑streamlined installment agreements
- Hardship determinations
PAYMENT PLANS
Taxpayers must file all required returns before requesting a payment plan. Interest and penalties continue until full payment. (“The taxpayer will be charged interest and late payment penalties… even if a request… is granted.”)
Short‑Term Payment Plan
- Up to 180 days under the Taxpayer Relief Initiative
- No user fee
- Available for balances under $100,000
Long‑Term Payment Plan (Installment Agreement)
- Up to 72 months (or until CSED)
- Requested using Form 9465 or online
- Refunds are applied to the balance
- IRS may file a lien
Guaranteed Installment Agreement
IRS must accept if:
- tax owed is $10,000 or less
- all returns filed for past 5 years
- taxpayer can pay within 3 years (“IRS must accept proposals… owe income tax only of $10,000 or less…”)
Streamlined Installment Agreement
- Balance ≤ $50,000
- Up to 72 months
- No financial statement required under $25,000
Non‑Streamlined Installment Agreement
- Balance > $50,000 or more than 72 months needed
- Requires Form 433‑F
User Fees (as of July 1, 2024)
- Online DDIA: $22
- Online non‑DDIA: $69
- Phone/mail DDIA: $107
- Phone/mail non‑DDIA: $178
- Low‑income: waived or reimbursed
OFFER IN COMPROMISE (OIC)
An OIC settles tax for less than the full amount. (“The IRS may accept an Offer in Compromise… for less than the full amount.”)
Three grounds:
- Doubt as to liability
- Doubt as to collectability
- Effective tax administration
Forms:
- Form 656 (collectability / ETA)
- Form 656‑L (liability)
Application fee: $205 (2025), unless low‑income or doubt‑as‑to‑liability.
Payment options:
- Lump Sum Cash (20% upfront)
- Periodic Payment (6–24 months)
Interest and penalties continue until full payment.
If accepted, taxpayer must stay compliant for 5 years.
FEDERAL TAX LIENS
A federal tax lien arises when:
- IRS assesses the tax
- IRS sends Notice and Demand
- Taxpayer does not pay within 10 days (“The lien arises when… taxpayer neglects or refuses to pay…”)
The IRS may file a Notice of Federal Tax Lien to protect its interest.
Appeal Rights (CDP Hearing)
IRS must notify the taxpayer within 5 business days of filing the lien. Taxpayer has 30 days after Appeals determination to petition Tax Court. (“IRS is required… give written notice… taxpayer will have 30 days…”)