An audit adjustment is only the beginning. Once the IRS assesses additional tax, the case moves from Examination to Collection — a separate function inside the IRS with its own personnel, its own procedures, and its own enforcement tools. Liens. Levies. Wage garnishments. Bank account seizures. Understanding the collection process is essential to protecting yourself between assessment and payment.
Step 1: Assessment and the first bill
Collection begins with assessment. After the audit closes and any Tax Court petition is resolved (or the 90-day window expires), the IRS posts the tax to your account. Within a few weeks you receive the first bill — Notice CP14 or CP501 — demanding payment in full within 21 days.
Step 2: The Notice and Demand sequence
If you do not pay, you receive a series of escalating collection notices over several months:
- CP501 — Reminder of balance due.
- CP503 — Second reminder.
- CP504 — Intent to levy state tax refunds.
- LT11 / Letter 1058 — Final Notice of Intent to Levy and Notice of Your Right to a Collection Due Process Hearing.
Step 3: Collection Due Process — the most important deadline
When you receive the LT11 (or Letter 1058), you have 30 days to request a Collection Due Process (CDP) hearing on Form 12153. Filing a timely CDP request stops collection action and routes the case to IRS Appeals, where you can negotiate an alternative — installment agreement, offer in compromise, currently not collectible status — and dispute the underlying liability if you never had a prior opportunity to do so.
Miss the 30 days and you lose the right to Tax Court review of the collection action. You can still request an equivalent hearing, but it is no longer suspending collection.
Step 4: Federal Tax Lien
A statutory federal tax lien arises automatically against all of your property the moment the tax is assessed and a demand for payment is unpaid. The IRS perfects the lien against third parties by filing a Notice of Federal Tax Lien in your local recorder’s office. The lien appears on title searches and can devastate your credit and your ability to sell or refinance property.
Step 5: Levy
A levy actually seizes property. The IRS can:
- Garnish wages (continuous until released).
- Take funds from bank accounts (one-time, with a 21-day hold before remittance).
- Seize Social Security benefits, federal payments, and state tax refunds.
- In rare cases, seize physical assets — vehicles, real estate, business equipment.
Your collection alternatives
Installment Agreement
Monthly payments over up to 72 months (or longer for larger balances). Streamlined agreements are available without financial disclosure for balances under certain thresholds.
Offer in Compromise
Settle the liability for less than the full amount when you cannot pay in full and the IRS agrees the offered amount represents your “reasonable collection potential.” Strict financial disclosure on Form 433-A/B and an application fee apply.
Currently Not Collectible
If full payment would cause economic hardship, the IRS may place the account in CNC status. Collection pauses. Interest and penalties continue to accrue, but no levies are issued. The IRS reviews periodically.
Innocent Spouse Relief
If the liability arose from a joint return and you can establish you did not know and had no reason to know of the understatement, you may qualify for relief from joint and several liability under IRC § 6015.
The bottom line
The IRS collection machine is methodical, automated, and patient. It is also bound by procedure — and every procedural step gives you a deadline and an opportunity. The single most important one is the 30-day window after the LT11 to request a CDP hearing. After that, the leverage shifts. Engage early, know your alternatives, and treat collection notices with the same urgency as audit notices.