How the IRS Automated Collection System (ACS) Works

IRS tax debt can build quickly — especially if you or your business owes several years of back taxes. When you’re in this position, you’ve likely received many different IRS notices and communications about your outstanding balance and any associated penalties. But where do those notices come from? How does the IRS monitor tax returns?

One key component is the Automated Collection System (ACS). This system issues notices and helps the IRS streamline the collections process when taxpayers are delinquent. If you or your business received a tax notice, you’ve probably already been dealing with the ACS.

Keep reading to find out how the system works, the notices it issues, and what to do next. When you’re not sure why you’re receiving notices or need help paying your business’s back taxes, contact 20/20 Tax Resolution for assistance.

Key Takeaways:

• What is the ACS? The ACS is an automated computer system and a call center for IRS collections.
• What does the ACS do? It sends notices and takes initial collection actions like liens and levies.
• Which notices does the ACS send? The ACS issues several escalating notices (like CP14, CP504, and LT11).
• What happens if I call the ACS? ACS agents are available by phone, but you won’t have the same point of contact. Each time you call, you may need to re-explain your situation. Be prepared with all relevant financial and tax information when you call.
• How can ACS agents help? If you can’t pay your tax debt in full, ACS agents may help you explore options like installment agreements or currently not collectible status. For more complex solutions like offers in compromise, it’s best to work with a tax expert.
• What other collection processes does the IRS use? If your debt is more than $100,000, or your case involves payroll issues or ongoing noncompliance, it may be escalated to a revenue officer. These officers conduct in-depth reviews and can take in-person enforcement actions, unlike ACS agents.

What Is the IRS Automated Collection System (ACS)?

When your business is delinquent on taxes, one of two things will happen. The IRS will either assign the case to a revenue officer or assign it to the ACS to handle. As the name suggests, ACS notices are automatically generated and sent out to taxpayers.

The ACS can handle a pretty wide range of tasks, including:

• Issuing notices about your unpaid taxes and penalties
• Seizing your tax refunds to cover your tax bill
• Notifying you of impending levies on your assets
• Filing federal tax liens

The IRS follows a specific process to try to get you to pay — so, for example, the first IRS notice you receive probably won’t be alerting you of an upcoming asset seizure. The IRS will try to collect via collection notices and penalties at first before taking those escalating actions.

Another important thing to know is that you can contact the ACS. However, ACS agents work out of call centers all over the country, while revenue officers work in local IRS offices. When you contact the ACS, you likely won’t get the same person on your case and may have to deal with longer wait times. The ACS is designed more for speedy outreach through notices and letters when a taxpayer owes $100,000 or less and the case hasn’t escalated.

Notices You May Receive from the IRS ACS

Here are some common IRS tax notices that the ACS may issue:

• CP14 (or CP161 for businesses): This notice outlines the taxes you haven’t paid, plus any penalties and interest.
• CP501: This is a reminder about your unpaid taxes and includes the ongoing total.
• CP503: This notice indicates you still haven’t paid and need to do so as soon as possible.
• CP504: More serious, Notice CP504 is Notice of Intent to Levy, so if you don’t act, the IRS can seize your property.
• Letter LT11 or 1058: This is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing.

Any IRS notice you get in the mail needs your quick and careful attention. Never ignore any notice. Usually, if you act quickly, you can prevent the situation from escalating and even higher IRS penalties from building. Ask a tax expert at 20/20 Tax Resolution about your or your business’s situation when you receive tax notices.

Can I Contact the IRS Automated Collection System?

Even though the ACS allows the IRS to send out automated notices and letters, you can still contact ACS offices. Keep in mind that you won’t get the same ACS agent every time you call, since the ACS operates more like a call center with general representatives.

You can call the ACS at 800-829-3903 for business tax return questions (or 800-829-7650 for individuals), but check your specific tax notices. The address to contact should also be provided on your notices, so make sure you send any information to the right place.

What Will I Need When I Call the ACS?

It’s important to be prepared anytime you contact the IRS. Some items to have ready include the following:

• Your business’s tax ID number (EIN)
• The applicable tax years involved in the case at hand
• All IRS notices you’ve received about the case to date
• Your current balance and penalties owed
• Questions you have for the agent

What to Expect from the ACS Agent

If you call the ACS, expect very long wait times. Callers often hold for an hour or more before reaching an IRS rep, and once connected, you may be put on hold again or even worse – accidentally disconnected.

Paying a small tax liability through the ACS is pretty straightforward, but other than that, dealing with the ACS can be very frustrating. It often requires multiple calls and repeated reviews of your paperwork or financials to get to a resolution.

In most cases, every time you call the ACS, you will have to verify your information and describe your tax problem again. The ACS agent may talk to you about:

• The basics of your financial situation
• Your tax history
• Deadlines you need to follow
• Tax relief options available if you can’t pay your balance

These agents aren’t prepared to cover everything, especially in complex tax circumstances. It may be a good idea to talk to a tax expert before contacting the ACS. A professional can take a look at your notices and advise you on what you need to do next to minimize your risks.

What If You Can’t Pay Your Tax Balance?

You may have received several IRS tax notices but are afraid to do anything because you can’t pay. Fortunately, the IRS gives businesses options for covering their outstanding balance when they’re having trouble. The ACS agent may talk about these options with you:

Installment Agreement

An installment agreement helps you pay off your debt in monthly payments over time. These plans are very common and provide relief when someone can’t pay the lump sum when it’s due. While you’ll still have to contend with penalties and interest, you won’t have to worry about the IRS coming after your business with severe collections actions while you have an active installment agreement in place.

Currently Not Collectible Status

Another option for relief is a temporary hold on collections, known as currently not collectible (CNC) status. You’ll alert the ACS agent that your business is dealing with financial hardship, and you may need to send in an information gathering form to show the details of your financials. If the IRS agrees, it will place your account in CNC status, but remember that it’s only temporary.

Partial Payment Installment Agreement

Different from a standard payment plan, the partial payment installment agreement (PPIA) allows you to pay a lower monthly amount, and you may be able to settle the debt for less at the end of the term or when the statute of limitations for collections expires. PPIAs require showing that you can’t pay, and you may have to send in Form 433-B to provide financial details for your business (Form 433-A for individuals or self-employed).

Offer in Compromise

An ACS agent most likely won’t be able to help you with offer in compromise (OIC) requests, but it could still be an option when you can’t afford payment. An OIC is approved by the IRS when an offer you provide is all the agency can reasonably expect to collect from you based on your finances. So, it allows you to settle your debt for less when absolutely necessary.

When You Might Work with a Revenue Officer

Most cases of delinquent taxes get sent over to the ACS for faster processing and collections. But when would you deal with a revenue officer instead? Here are situations that may warrant an officer:

• Your debt is high — usually above $100,000
• You have a complicated tax situation that requires extra attention
• You have repeatedly failed to comply with tax regulations
• Your business has unresolved payroll tax problems

Note that you can actually request to have your case moved from the ACS to a revenue officer, so the IRS may agree to that if you’d rather work with the same person for more complex problems. But revenue officers, since they work in local field offices, can take in-person enforcement actions, while ACS agents cannot. Many taxpayers thus find it feels more serious or daunting to work with an officer.

IRS Letter 725-B

If your case is escalated from the ACS to a revenue officer, you’ll get Letter 725-B in the mail. This alerts you about an upcoming meeting with your officer to go over your tax issue. It could take place at your business location, at an IRS office, or on the phone. Follow the instructions on the letter to confirm or reschedule your meeting.

IRS Form 9297

You may also get Form 9297, Summary of Taxpayer Contact, which informs you that your case has been assigned to a revenue officer and asks for specific details and documents related to your finances to send to your officer.

Assignment to a Collection Agency

Sometimes, the IRS kicks accounts out of the ACS and sends them to a third-party collection agency. You will receive a CP40 notice if your account has been assigned to a private collection agency (PCA). The collection agency can accept payments and set up installment agreements. They cannot initiate most collection actions or help you apply for settlements like offers in compromise.

When to Get Help with the ACS

When you’re dealing with the ACS because you didn’t pay taxes, you may be able to handle everything on your own if your situation is pretty straightforward. You may just need to pay off a low balance listed on a notice and can do so online in a few minutes.

Some situations, however, may call for outside help. If you have multiple years of debt, for instance, it may be becoming harder and harder for you to pay it off. You may not be able to pay much of anything right now because of financial hardship. Or, you may not understand how to respond to notices or information requests.

In these more complex circumstances, your best bet is to consult a tax professional. An expert will review your situation, contact the ACS for you if necessary, explain your tax resolution options, and ensure the IRS doesn’t come after your assets.

The team at 20/20 Tax Resolution can help with all of this and more. We work with a variety of businesses, self-employed individuals, and a wide range of other taxpayers who are dealing with unpaid back taxes, penalties, and escalating IRS collections actions.

Contact our office to set up a free consultation. Don’t wait until your case is sent to an IRS revenue officer.

FAQs About the Automated Collection System

What Does ACS Mean on my IRS Notice?

ACS stands for Automated Collection System, which is an automated system the IRS uses to speed up collections for more straightforward cases.

What’s the Difference Between ACS and a Revenue Officer?

The IRS will assign your case of delinquent taxes either to the ACS or a revenue officer. The ACS is usually reserved for cases involving $100,000 or less in owed taxes.

How Can I Reach Someone at ACS?

You may have to deal with longer wait times when contacting the ACS, since agents work in call centers instead of local field offices. The national phone numbers are 800-829-3903 for businesses or 800-829-7650 for individuals.

Can the ACS Levy My Assets Without Warning?

No, the IRS won’t seize your assets without giving you plenty of notice and plenty of opportunities to rectify the issue. While the ACS can issue notices of intent to levy, it will send you other notices first that inform you of your unpaid taxes and the next steps.

Sources:

https://www.irs.gov/individuals/understanding-your-cp161-notice

https://www.irs.gov/individuals/understanding-your-letter-725-b