What Collection Tools Can the IRS or State Use When I Owe Taxes?

Look Out for These Common Tax Collection Tools

The IRS and state revenue departments do not immediately jump to collection tools if you’re delinquent on your taxes. The process will begin with a bill and letter of explanation, which may specify penalties and interest.

If you cannot pay the bill in full, you’ll have the option to set up a payment plan or provide evidence of why you are unable to pay (bankruptcy, identity theft, located in a disaster area, etc.).

However, if you have exhausted the options and have no excuse acceptable to the IRS or state revenue department, you face the possibility of liens against your property, seizure (levy) of your assets, or refunds being withheld. Ultimately, these could mean losing your:

• Real estate
• Vehicles (including boats)
• Wages
• Bank accounts
• Retirement income
• Social security
• Tax refunds (federal and state)

Can the IRS Take Away Your Driver’s License?

In certain states, the IRS can take away your driver’s license (or your professional license). More typically, however, this collection tool is used at the state level because a driver’s license (and various business licenses) is issued by the state.

Comptrollers (executives who oversee government finances) work with motor vehicle departments to ensure individuals and businesses pay their taxes. If you have been flagged as owing state back taxes, you may be unable to renew your driver’s license or vehicle registration.

Unfortunately, you’ll have to take the driver’s license hold up with the comptroller’s office. If you contact them as soon as you learn about the hold, you may be able to agree on a solution and allowed to renew on schedule, though this usually involves paying a percentage of what you owe.

Your best bet is to work with an experienced tax attorney before you even contact the Comptroller’s office. We’ll discuss this more later in the article.

RELATED: How to Avoid a Maryland Tax Lien

Can the IRS Take Away Your Passport?

The IRS has the right to certify seriously delinquent tax debt to the State Department, which can then take action, including denying or revoking your passport.

For this purpose, seriously delinquent tax debt means about $54,000 (adjusted annually for inflation and including interest and penalties). If this federal debt is legally enforceable, and liens have been filed or a levy issued, the debt may be certified to the State Department.

As with other collection tools, the department will not immediately implement the action of taking away your passport. First you will get a letter and have 90 days to resolve issues, pay the debt, or set up a payment plan. If you do one of these, the IRS’ certification to the State Department will be reversed.

Get Your Passport or License Reinstated with the Help of a Tax Attorney

For many people, the loss of a driver’s license or passport can pose a serious threat to their income. Obviously, the loss of a business or professional license can do the same.

If you have serious tax issues and are concerned about losing a license or passport, rest assured that working with an experienced tax attorney can help. Even if you’ve already had something revoked, know that your passport or license can be reinstated when proper steps are taken.

At S.H. Block Tax Services, we encourage you to reach out to us before contacting the comptroller. Our knowledge of license holds and reinstatement procedures will be invaluable in negotiating releases and payment plans. We can assist you in securing a waiver of initial payment, disputing the debts, designing payment plans, and negotiating a decrease in the total you owe.

RELATED: How Does the IRS Decide What I Can Afford to Repay?

Contact S.H. Block Tax Services Today

If you or someone you love is dealing with seriously delinquent taxes, concerned about losing a license or passport, or hoping to get a license or passport reinstated, contact S.H. Block today for advice and representation from an experienced tax attorney.

Call (410) 872-8376 or fill in the contact form on our website to schedule your consultation. It will be our honor to work with you!

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.