01
Filing, assessment, and when the tax becomes due
The collection process begins when a return is filed under IRC §§6011, 6012, and 6072. A balance-due return is a self-assessed liability. The IRS then makes an assessment under IRC §6201 and records it under §6203 — without an assessment, the IRS generally cannot collect. Tax shown on a return is due on the statutory filing date under IRC §6151, and an extension of time to file is not an extension of time to pay. See IRM 3.11, IRM 25.6.1, and IRM 4.4.
02
Failure-to-file and failure-to-pay penalties
IRC §6651(a)(1) imposes a Failure-to-File penalty of 5% of the unpaid tax per month, capped at 25%. IRC §6651(a)(2) imposes a Failure-to-Pay penalty of 0.5% per month, also capped at 25%. When both apply in the same month, the FTF is reduced by the FTP, yielding a combined 5% per month. The FTP rate rises to 1% per month after a Final Notice of Intent to Levy is ignored and drops to 0.25% while certain installment agreements are in effect. See IRM 20.1.2.
03
Interest under IRC §§6601 and 6621
Interest runs from the original due date of the return, compounds daily, and — unlike penalties — has no statutory cap. The rate is set quarterly at the federal short-term rate plus three percentage points for individuals. Interest also accrues on penalties from the date they are assessed. See IRM 20.2.
04
Notice and demand — the CP14 through CP504 stream
Under IRC §6303, the IRS must issue a Notice and Demand for Payment, generally within 60 days of assessment. In practice this is the CP14. Reminders (CP501, CP503) follow, then CP504 warns of levy against state tax refunds and other collection action. This is the widest window to resolve voluntarily — installment agreement, Offer in Compromise, CNC, or full payment — before enforced collection begins. See IRM 5.19.1, 5.19.4, and 5.19.5.
05
Case assignment: ACS vs. Revenue Officer
If the balance is still unpaid after the notice stream, the account is worked either by the Automated Collection System (IRM 5.19) or, for larger or more complex cases, assigned to a field Revenue Officer (IRM 5.1). Business trust-fund cases, repeat noncompliance, and large individual liabilities are more likely to draw an RO.
06
Federal tax lien under IRC §§6321–6323
A federal tax lien arises automatically once tax is assessed, notice and demand is issued, and the taxpayer neglects or refuses to pay. The IRS may then file a Notice of Federal Tax Lien (Form 668(Y)) under §6323 to perfect priority against other creditors. A filed NFTL impairs financing, refinancing, and asset sales. See IRM 5.12.
07
Final Notice of Intent to Levy and the CDP hearing
Before levying most assets, IRC §6331(d) requires the IRS to send a Final Notice of Intent to Levy — typically Letter 1058 or LT11 — and IRC §6330 gives the taxpayer 30 days to request a Collection Due Process hearing on Form 12153. A timely CDP request generally halts levy action while Appeals considers collection alternatives (IA, PPIA, OIC, CNC, innocent spouse) and, in certain circumstances, the underlying liability. See IRM 5.11, 5.1.9, and 8.22.
08
Levy action under IRC §6331
If the taxpayer does not resolve the balance or timely request a CDP hearing, the IRS may levy wages (Form 668-W), bank accounts (Form 668-A — with a mandatory 21-day hold under §6332(c)), Social Security and federal payments, accounts receivable, retirement accounts, and business assets. Seizure and sale of real property require additional judicial or supervisory steps. See IRM 5.11.
09
Collection alternatives
The IRS strongly favors voluntary resolution. Installment Agreements (IRC §6159, IRM 5.14) spread payments over time; Partial Payment Installment Agreements pay only what the taxpayer can afford before the CSED expires. Currently Not Collectible status (IRM 5.16) suspends active collection when levy would create hardship. Offers in Compromise (IRC §7122, Treas. Reg. §301.7122-1, IRM 5.8) settle the liability based on doubt as to collectibility, doubt as to liability, or effective tax administration. Penalty abatement under IRC §6404 (First Time Abate or reasonable cause, IRM 20.1.1) removes qualifying penalties.
10
Collection Statute Expiration Date (CSED)
Under IRC §6502, the IRS generally has 10 years from the date of assessment to collect. The clock is tolled by bankruptcy, pending CDP hearings, pending or accepted Offers in Compromise, certain installment agreement requests, and extended time outside the United States. Correct CSED math often changes the resolution strategy entirely. See IRM 5.1.19.
11
Special situation — Substitute for Return (SFR)
When a taxpayer does not file, IRC §6020(b) authorizes the IRS to prepare a Substitute for Return using W-2 and 1099 data. SFRs generally omit deductions, exemptions, and credits — producing an inflated liability that then feeds the entire collection process above. Filing an original return to replace the SFR is nearly always the first move. See IRM 5.18.1.
