I owe money to the Internal Revenue Service and I cannot pay, what is going to happen next?



It is very important for any taxpayer to understand the IRS billing and notice process. As a former IRS agent and teaching instructor I know this system inside and out and all the methodologies that control it as well as the billing cycle and the billing processes that govern tax debt owed to the IRS.


What happens first:

IRS’s kind in the beginning and you do not receive a nasty gram from the Department of treasury.

The first thing that you will do is receive a bill for the amount you will.

This bill actually starts the IRS collection process and will continue until your account is closed by the Internal Revenue Service.This process is called the IRS tax assessment and starts the statute of limitation on every case which is 10 years that IRS creates a notice on the IRS billing system.


There are different ways that IRS can close your case.Every case is different and your unique set of circumstances needs to be evaluated before a recommendation or determination can be made.

As a general rule, IRS after reviewing your case and your current financial statement may close your case by putting you into a non-collectible hardship status, entertaining a payment agreement or the possibility of settling your tax debt through an offer in compromise.

This will happen over a ten-year period of time in which the IRS collection statute of limitations expires.

It is very important for every taxpayer to understand and to make sure that the tax debt that IRS is assessing you for is correct.

I advise all taxpayers to pull out there tax return and compare it to the bill to make sure the amount owed to IRS is correct.

If not, your first step is to correct the IRS tax notice and make sure the proper amount you always on the IRS computer.


The first notice you receive will be a letter that explains the balance due and demands payment in full.

It will include the amount of the tax, plus any penalties and interest accrued on your unpaid balance from the date the tax was due.

The unpaid balance is subject to interest that compounds daily and a monthly late payment penalty. It’s in your best interest to pay your tax liability in full as soon as you can to minimize the penalty and interest charges.

If you’re not able to pay your balance in full immediately, the IRS may be able to offer you a monthly installment agreement. There are various programs that IRS has to pay back taxes depending on the amount you owe and the period of time you wish to pay them back.

If this is your situation you could call us today and speak to a true IRS tax expert.

IRS should be contacted at some time during this process especially when you receive the final notice to let them know you are unable to pay the tax debt in full and you wish to make arrangements.

Making arrangements is not necessarily to pay off the debt but may be to ask IRS to place you in a hardship or let them know you want to settle your tax debt through the filing of an offer in compromise

If you need more time to pay, you may ask that IRS  delay collection and report your account as currently not collectible.

If the IRS determines that you can’t pay any of your tax debt due to a financial hardship, the IRS may temporarily delay collection by reporting your account as currently not collectible until your financial condition improves.

Being currently not collectible doesn’t mean the debt goes away. It means the IRS has determined you can’t afford to pay the debt at this time.

Prior to approving your request to delay collection, we may ask you to complete a Collection Information Statement (Form 433-F.pdf, Form 433-A.pdf, or Form 433-B.pdf) and provide proof of your financial status (this may include information about your assets and your monthly income and expenses).

If IRS does delay collecting from you, your debt continues to accrue penalties and interest until the debt is paid in full. The IRS may temporarily suspend certain collection actions, such as issuing a levy (explained below), until your financial condition improves. However, we may still file a Notice of Federal Tax Lien (explained below) while your account is suspended.

It’s important you contact the IRS and make arrangements to pay the tax due voluntarily. is best to check with the professional tax firm about the various programs that are available to take care of your situation and to draw up a short  term and long term strategy.

If you do not contact IRS, they may take action to collect the taxes.

For example:

1. Filing a Notice of Federal Tax Lien,
2. Serving a Notice of Levy, or Wage Garnishments,
3. Offsetting a refund to which you’re entitled.


 What is a federal tax lien:


A federal tax lien is a legal claim to your property, including property that you acquire after the lien arises.

The federal tax lien arises automatically when you fail to pay in full the taxes that have been assessed against you within ten days after the IRS sends the first notice of taxes owed and demand for payment.

The IRS may also file a Notice of Federal Tax Lien in the public records, which publicly notifies your creditors that the IRS has a claim against all your property, including property acquired by you after the filing of the Notice of Federal Tax Lien.

The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating.

Once a lien arises, the IRS generally can’t release the lien until the tax, penalty, interest, and recording fees are paid in full or until the IRS may no longer legally collect the tax.

The IRS will withdraw a Notice of Federal Tax Lien if the notice was filed while a bankruptcy automatic stay was in effect.

The IRS may withdraw a Notice of Federal Tax Lien if the IRS determines:

1. The Notice was not filed according to IRS procedures;

2. You enter into an installment agreement to satisfy the liability unless the installment agreement provides otherwise;

3. Withdrawal will allow you to pay your taxes more quickly; or

4. Withdrawal is in your best interest, as determined by the National Taxpayer Advocate, and in the best interest of the government.

The IRS may levy (seize) assets such as wages, bank accounts, social security benefits, and retirement income.

The IRS also may seize your property (including your car, boat, or real estate) and sell the property to satisfy the tax debt. In addition, any future federal tax refunds or state income tax refunds that your due may be seized and applied to your federal tax liability.

You have rights and protections throughout the collection process.

if you will money to the Internal Revenue Service and you need to know what’s next call former IRS agents who can explain the process and set up a  short-term/long-term strategy to  and your tax problem altogether.

It is very important for everyone to know that all tax returns need to be filed and that all taxpayers remain current with withholding or estimated tax payment so IRS can work with you and feel confident about their negotiations.

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Mr. Michael D. Sullivan

Michael D. Sullivan is the founder of MD Sullivan Tax Group. He had a distinguished career with the Internal Revenue Service for 10 years. As a veteran IRS Revenue Officer / Agent, he served as an Offer in Compromise Tax Specialist and Large Dollar Case Specialist.

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