What Happens When You File a Return With a Balance Due

Now, I want to talk about what happens when you file a tax return with a balance due. You go to file your tax or you have your CPA file your taxes. These taxes gets transmitted to the IRS and they go to a service center. Regardless of whether you paper file or whether you file electronically, that information gets processed in that service center. Tax returns generally are processed on the spot. They take about four to six weeks to work their way through the IRS system. Once you file your tax returns, you can actually expect your balance due won’t appear for four to six weeks. That’s an important thing for non-tax counsel to be aware of because if your client files a return, they’re generally not going to hear from the IRS report for four to six weeks.

You’ve got a little bit of grace period if they filed on October 15th and say, “Oh my goodness. I owe $20,000 liability.” You’re going to have about four to six weeks to adequately address the problem before you get correspondence from the IRS. Once in that service center, once the return has been processed, then the balance due appears on the taxpayer’s account. If you log in the IRS computer, you will that John Smith owes $20,000. Once John Smith owes $20,000, the IRS will send out a series – a three part series of increasingly threatening letters called “Notices of Balance Due”. And they’ll say, “Hey, you owe us money.” And if you don’t respond, about four weeks later they will say, “Hey you owe us more money.” And then they go, “Hey, we’re serious. You really owe us money. Please, please pay us.” If you still don’t do anything, then after about 16-24 weeks you will move from the balance due department into automated collection systems or ACS. ACS, which we’ll get into in a minute, is the first stage of collection. It is a big national call center-like environment that handles IRS collection matters. For more information on the time table and how returns are processed, you can refer to Publication 594 which overviews the IRS collection process and the balance due process as well.

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