Many taxpayers encounter the situation where they owe tax but cannot pay. When this happens I am often asked (a) what will happen next?, and (b) when will it happen? The what is easy to answer, the when depends on many variables.

Taxpayers that owe tax but cannot pay will get five collection letters before the IRS begins taking its assets and/or wages as follows

1st - Initial Collection Letter In Varying Forms
2nd - Collection Letter CP 501
3rd - Collection Letter CP 503
4th - Collection Letter CP 504
5th - Collection Letter 1058, Notice of Intent To Levy

If you want to see what these letters look like, see my web site at www.ATaxLawyer.com, click the "Stop IRS Collections" button and read the article. The first three letters are designed to scare a taxpayer into calling an IRS revenue officer (a collector) - generally, they can be ignored without fearing any enforced collection action.

The fourth letter allows the IRS to take any state tax refund, but otherwise has no legal significance.

The fifth letter is called a Notice of Intent to Levy (NOIL) and has great legal significance. Before the IRS can take your assets and/or wages, it must first mail you a NOIL and wait 31 days. Within 30 days on the NOIL you can elect to have a Collection Due Process Hearing (CDPH) which will stop all enforced collection for several months (until 30 days after the CDPH ends). Usually, timely electing a CDPH gets you three to six more months free from the fear of enforced collection. At the CDPH, the taxpayer may be able to reach a mutually acceptable solution without the need for enforced collection action. If no CDPH is elected, the IRS is free to take your assets and/or wages without further notice. While you can request a CDPH on your own and represent yourself, hiring a competent tax lawyer will always get you a better result.

Generally, the first four letters will happen at intervals of five weeks. The NOIL usually happens from one to nine months later, depending on (a) how much is owed, (b) whether or not the case has been transferred to a revenue officer for collection, and (c) the type of tax owed.