Background

Federal tax collection is a staged process designed to balance voluntary compliance with government revenue needs. After the IRS assesses a tax (usually when you file or the IRS assesses an adjustment), the agency sends a series of notices. If those notices are ignored or payment arrangements are not made, collection activity escalates—first automated notices, then revenue officers and legal actions such as filing a Notice of Federal Tax Lien (NFTL) or issuing a levy. (IRS — “Understanding the Collection Process”: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-the-collection-process)

Key triggers that start collections

  • Assessment of tax: The IRS must first assess the tax. This usually happens when you file a return or when the IRS issues an assessment after an audit. (IRC sections and IRS guidance)
  • Missed payments after notices: If you don’t respond to the IRS’s initial notices (CP-series) and demand for payment, the agency will escalate.
  • Failure to enter an agreed plan: If you refuse or default on an installment agreement, the IRS may pursue enforced collection.
  • Special categories of tax: Payroll (trust fund) taxes and Trust Fund Recovery Penalties (TFRP) get priority because those amounts are held in trust for employees and are collectible from responsible individuals.

How the IRS prioritizes which debts to collect first

The IRS does not follow a simple “largest first” rule. Prioritization depends on several factors:

  1. Statute of limitations on collections (10-year rule)
  1. Type of tax and legal priority
  • Trust fund (payroll) taxes and certain penalties are high priority because they are personally collectible from responsible parties. The IRS treats these differently than ordinary income tax.
  1. Ability to collect and taxpayer behavior
  • If a taxpayer shows willingness to cooperate (files current returns, provides financial information, responds quickly), the IRS is more likely to negotiate an installment agreement or delay enforced action. Nonresponsive taxpayers are escalated to liens and levies sooner.
  1. Dollar amount and cost-effectiveness
  • The IRS weighs the cost and administrative burden of pursuing certain collections; small-balance cases may stay in automated collection for longer, while large-dollar cases can be assigned to revenue officers.
  1. Bankruptcy, Offers in Compromise, and pending appeals
  • Active bankruptcy cases, accepted Offers in Compromise, or timely-filed appeals can put collections on hold. Conversely, a rejected offer or dismissed bankruptcy will remove that protection and can restart collection urgency. (Taxpayer Advocate and IRS guidance)

Typical collection timeline (simplified)

  • Notice stage: CP notices and demand letters telling you how much is owed.
  • Final notice: “Notice of Intent to Levy” and “Notice of Your Right to a Hearing” — this gives you 30 days to request a Collection Due Process (CDP) hearing.
  • Enforcement: Filing an NFTL, wage garnishment, bank levy, and seizure of assets if you don’t resolve the debt or obtain a legal stay. (IRS — “Understanding the Collection Process”)

Practical options to stop or slow collections

  • Pay in full: Fastest way to stop collection notices.
  • Installment agreement: Many taxpayers qualify; the IRS uses Form 9465 or online tools. To set up a realistic plan, gather a complete financial snapshot (Form 433-A/B) so you can propose affordable payments. (See our guide on setting up an installment plan: Setting Up an Affordable Installment Agreement with the IRS)
  • Offer in Compromise (OIC): If you can’t fully pay, an OIC may settle the debt for less than the full amount if you show doubt as to collectibility or exceptional hardship. These take longer and require detailed documentation. (Compare options: When an Offer in Compromise Is Better Than an Installment Agreement)
  • Request currently not collectible status: If you have no ability to pay, the IRS may temporarily pause collection and classify the account as currently not collectible.
  • Request a CDP hearing: If you receive a Final Notice of Intent to Levy, you have 30 days to request a hearing to challenge the levy or propose alternatives.

In-practice insight

In my work helping clients, I often see faster, better outcomes when taxpayers answer the first IRS letter and provide a short financial snapshot. Even modest payments and clear communication reduce the chance the IRS will file a lien or levy. When payroll taxes are involved, act immediately — those cases move faster and may expose owners to personal liability.

Common mistakes

  • Ignoring early notices: This accelerates escalation and limits options.
  • Failing to file missing tax returns: The IRS won’t negotiate fully until returns are filed.
  • Under-documenting your finances: Missing or sloppy records make offers and agreements harder to accept.

Frequently asked questions

  • What if I don’t respond to the Final Notice of Intent to Levy?
    The IRS can proceed to levy wages, bank accounts, or other assets if you don’t request a timely CDP hearing or otherwise resolve the debt.

  • Can the IRS seize my home?
    The IRS can levy real property in rare cases, but typically it files an NFTL first (which is public) and uses a levy as a later enforcement tool.

  • How long can the IRS collect a debt?
    Generally 10 years from the date of assessment, though that period can be suspended for bankruptcy, offers under consideration, or other statutory interruptions.

Where to find official guidance

Resources on FinHelp

Professional disclaimer

This article is educational and does not replace personalized tax or legal advice. For guidance tailored to your circumstances, contact a qualified tax professional, CPA, or tax attorney.