What Debts Can the IRS Collect?
The Internal Revenue Service (IRS) is an agency responsible for administering and enforcing the internal revenue laws of the United States. One of its primary functions is to collect taxes from individuals and businesses. However, the IRS has the authority to collect various types of debts beyond just taxes. This article will explore the different debts that the IRS can collect and the legal avenues it can take to recover these debts.
1. Unpaid Taxes
The most common debt that the IRS can collect is unpaid taxes. This includes income taxes, payroll taxes, estate and gift taxes, and excise taxes. If individuals or businesses fail to file their tax returns or pay the taxes owed, the IRS can initiate collection efforts to recover the debt.
2. Tax Penalties and Interest
In addition to the actual tax debt, the IRS can also collect penalties and interest that accumulate on the unpaid tax balance. Penalties may be imposed for late filing, late payment, failure to pay, and failure to deposit taxes. Interest is charged on the unpaid balance to compensate the government for the use of its money.
3. Tax Liens
If an individual or business fails to pay their tax debt, the IRS can file a tax lien against their property. A tax lien is a legal claim against the property that secures the IRS’s interest in the debt. It serves as a public notification that the IRS has a claim on the property and can be used to seize assets if the debt remains unpaid.
4. Levy on Property
If a tax lien is not satisfied, the IRS can issue a levy on the taxpayer’s property. A levy is a legal seizure of the taxpayer’s property to satisfy the tax debt. This can include garnishing wages, levying bank accounts, seizing personal property, and even seizing real estate.
5. Substitute for Return
If a taxpayer fails to file a tax return, the IRS can file a substitute for return on their behalf. This is an estimated tax return prepared by the IRS using available information. The IRS can then use this return to assess and collect taxes, penalties, and interest.
6. Trust Fund Recovery Penalty
The IRS can also impose a trust fund recovery penalty on individuals who are responsible for paying employment taxes but fail to do so. This penalty is designed to ensure that employers remit payroll taxes to the government.
Conclusion
The IRS has various legal tools at its disposal to collect debts beyond just unpaid taxes. Understanding the types of debts the IRS can collect and the actions it can take is crucial for individuals and businesses to avoid potential financial consequences. It is advisable to seek professional tax advice and address any tax obligations promptly to avoid the aggressive collection efforts of the IRS.
