The Complete Guide to IRS Collections

The IRS has six primary collection tools: federal tax liens (filed under IRC §6321 to attach to all property), levies on bank accounts and wages (under §6331), seizure of physical assets (under §6331), passport revocation for seriously delinquent debt over $59,000 (under §7345), trust-fund recovery penalty against responsible officers (under §6672), and referral to the Department of Justice for foreclosure suits. Most collection cases never reach physical asset seizure — the threat of bank or wage levy resolves most accounts.

Generally ten years from the date of assessment under IRC §6502. The clock starts when the tax is assessed (not when filed). Several events suspend the CSED: filing an OIC, bankruptcy, requesting a Collection Due Process hearing, leaving the country for six months, and certain installment agreement applications. The IRS may also extend the CSED by written agreement, but cannot extend it unilaterally. Calculating the exact CSED for each tax year is one of the first strategic moves we make.

A Notice of Federal Tax Lien (NFTL) is the IRS's public filing under IRC §6323 that gives notice to other creditors that the IRS has a claim on all your property. It does not seize anything — it perfects the IRS's priority. The NFTL is filed in the county where you live and shows up on title searches. A filed NFTL can damage credit, complicate property sales, and prevent refinancing. Lien withdrawal (under §6323(j)) and lien subordination (under §6325(d)) are the two primary remedies.

A levy is an actual seizure of property — the IRS takes funds from a bank account, paycheck, retirement account, or other source. Bank levies freeze funds for 21 days before remittance to the IRS; wage levies are continuous until released. Levies can be released under IRC §6343 by paying the balance, entering an installment agreement, demonstrating economic hardship, or obtaining a Collection Due Process hearing. The 21-day window on bank levies is the practical window for action.

Yes. Streamlined Installment Agreements are available for balances up to $50,000 with 72-month repayment, no financial disclosure required. Non-streamlined agreements require Form 433-A/F financial analysis. Partial-Pay Installment Agreements (PPIA) allow payment of less than the full balance if you can document inability to pay in full — the CSED runs and the IRS writes off the unpaid portion at expiration. Each option has different criteria and trade-offs.

Currently Not Collectible (CNC, IRS Status 53) is a temporary collection hold the IRS places on accounts where collection would cause economic hardship. The IRS stops active collection — no levies, no garnishment — but interest and penalties continue, and the CSED keeps running. The IRS periodically reviews CNC accounts. For taxpayers with modest income and assets, CNC can be the right answer because the CSED expires before the IRS resumes collection.

Two main paths: First-Time Penalty Abatement (FTA) is administrative and applies once per taxpayer per liability — three years of clean compliance history qualifies. Reasonable Cause abatement under IRC §6651 and §6662 requires showing that the failure was due to circumstances beyond your control (illness, natural disaster, reliance on professional advice). Reasonable cause requests are document-heavy and decided case-by-case. Interest is generally not abatable unless caused by an IRS error.

Income tax debt can be discharged in Chapter 7 bankruptcy if it meets all of: (1) the return was due more than three years before filing (the three-year rule), (2) the return was actually filed more than two years before bankruptcy (the two-year rule), (3) the tax was assessed more than 240 days before bankruptcy (the 240-day rule), and (4) the return wasn't fraudulent and you didn't willfully evade the tax. Trust-fund taxes, payroll taxes, and excise taxes are not dischargeable. Tax-bankruptcy interaction is technical — get a specific analysis before filing.