Taxation & Estate Planning

When is the IRS prohibited from taking collection action? Part II

By howardlevy

Here are five more situations in which the IRS is barred from taking collection action against you:

• When the timeframe to collect the liability has expired.  The IRS has 10 years to collect a liability from the date it puts the liability on its books. When the 10 years is up, the tax is cleared from the IRS’s books and can longer be collected.  More on that here at “When does the collection of IRS debt expire?”

• When you are in bankruptcy.   Section 362 of the Bankruptcy Code creates what is known as an “automatic stay” that prevents creditors, including the IRS, from pursuing collection of a debt. Bankruptcy is also an extremely effective way of releasing IRS seizures and garnishments.   Properly done, it can also eliminate tax liabilities.  More on that here at “But I thought you can’t eliminate taxes in bankruptcy.”

• When seizure of a personal residence is being considered, the IRS must first bring an action in U.S. District seeking court approval.  The IRS cannot do take your house on their own.  Incidentally, IRS seizures of personal residences are very rare (676 total of personal and real property across the country in 2007).  More on that here at “IRS by the numbers.”

• When a Final Notice of Intent to Levy has not been sent to you.  The IRS cannot take collection action until they first send you a notice telling you so.  After the notice is sent, action is barred for 30 more days.  More on that here at “What do all these different IRS collection letters mean?”

• When a Collection Due Process appeal is pending. After the IRS sends its Final Notice of Intent to Levy, you have the right to dispute and stop the collection action by filing a request for an appeals hearing. Provided the request is filed timely (within 30 days), while this hearing is pending, the IRS cannot take action to collect.  

Full post as published by IRS and the Law on December 07, 2008 (boomark / email).