How does the IRS collect taxes?

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Updated: 3/27/2003 1:09 pm
The Internal Revenue Service, or IRS (I-R-S), initiates collection proceedings against you when you don't pay your taxes in full with your yearly return. The IRS will send you a bill, which explains the taxes owed and the reason for the unpaid portion. In addition to the amount of past-due taxes, the bill also reflects penalties and interest applied to the unpaid balance beginning the date the taxes were due. If you don't agree with the bill, contact the IRS immediately and discuss the charges. If you agree with the bill but can't pay the taxes, it's a good idea to make arrangements with the IRS. You may be able to work out a repayment plan or other settlement to pay your taxes. Any late payment to the IRS will accrue interest from the date the taxes were originally due. Failure to pay the IRS can result in liens or levies. With a lien, the IRS attaches a claim to all your property or rights to property, including your car and your house. A Notice of Federal Tax Lien is public record, so all your creditors can be alerted to the fact that your property is claimed by the federal government, which could damage your credit rating. The IRS may also take and sell your property to pay for your past-due taxes. This is called a 'levy.' To avoid such actions, pay your federal income taxes on time each year. It's also possible for the IRS to seize any tax refund you would receive from future returns. If you'd like more information regarding how the IRS collects taxes, contact a tax-law professional.

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