Both the IRS and FTB have the authority to collect a balance due through various enforcement actions including levies on wages, salary, and other income; (2) filing a Notice of federal tax lien; (3) Seizure and sale of assets; and (4) with respect to the IRS, suits by the U.S. government in federal district court such as a suit to reduce a tax assessment to judgment.
If a taxpayer lacks the ability to pay in full, there are several collection alternatives that exist, and they include the following:
- Extension of time to pay
- Installment agreement
- Offer in Compromise (doubt as to liability or doubt as to collectability)
- Currently not collectable status (based upon financial analysis)
- Innocent spouse relief
- Penalty abatement (file Form 843, Claim for Refund and Request for Abatement, and request abatement of civil penalties by establishing reasonable cause)
- Request for audit reconsideration (an audit reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed). See Publication 3598 and IRM 22.214.171.124 (12-16-2015).
- Bankruptcy (debtor may be able to discharge taxes and/or bring an adversary proceeding to litigate the amount owed in federal bankruptcy court)
- Claim for credit or refund. There is a limitation period on filing a claim. See I.R.C. sec. 6511(a). If the IRS denies the claim, the taxpayer may have an administrative hearing before the IRS Office of Appeals, and ultimately may file a refund suit in federal district court.
Individuals or businesses facing tax collection should contact competent tax counsel, who can evaluate the case, explain the options, and develop a defensible strategy.