| When the IRS realizes that an individual has | | | | asking. When you receive your assessment letter or |
| outstanding back taxes it begins its automated | | | | any of the following CP letters you can simply reply to |
| collection system. Understanding the basics of how this | | | | the letter stating that you cannot pay at the current |
| system works can allow individuals to delay the IRS to | | | | time and you would like an additional 45 days. You |
| buy more time to get the money together to pay the | | | | don't need to give excuses, just simply ask and the |
| back taxes owed, while slowing interest and penalties. | | | | majority of the time they will grant it to you. When you |
| Once the automated collection system starts on an | | | | get this 45 days, someone in the IRS will input a freeze |
| individual, they will begin receiving a series of notices | | | | code into the computer that will halt the collection |
| from the IRS. These notices consist of an initial | | | | system for 45 days. If you do not pay within this |
| assessment for back taxes owed plus any penalties | | | | period it will begin up the collections where it left off |
| and interest. This assessment notice is then followed | | | | before and you will receive another letter and you can |
| up by a series of CP-500 letters (CP 501-504). When | | | | do the same thing again. This time it is best to send in |
| these letters start they come off in a very | | | | a little bit of money to show that you are trying to pay. |
| nonthreatening manner, each additional letter you | | | | By asking for extensions this will buy you several more |
| receive will become a bit more threatening. After your | | | | months to pay off outstanding back taxes, sometimes |
| receive CP 504 you will receive a notice of federal | | | | because of the inefficiency of the IRS it can buy more |
| tax lien (NFTL) and this is where IRS collections will | | | | than a year's time. |
| begin. From first assessment letter to the notice of | | | | If you still find that you need more time in order to |
| federal tax lien, this process typically takes place in a | | | | settle your back taxes, it is a good idea to set up a |
| period of 4 to 6 months. It is best to settle back taxes | | | | payment plan with the IRS. The most typical plan is an |
| before you receive a NFTL because this will hurt your | | | | installment agreement. The IRS has many settlement |
| credit and make many financial problems for you. | | | | methods they allow, if you want to settle your taxes |
| In order to gain more time from the IRS without | | | | for less than you owe it is best to consult a tax |
| receiving additional penalties is normally as simple as | | | | professional to see if you would qualify. |