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IRS will initiate the collection process if you do not pay in full when you file your tax return. IRS will issue a bill with explantions of the reasons for the balance due and require payment in full. The Bill include penalities and interests on unpaid balance. You can pay this amount by check, or using credit card.

If you can't pay then you can request for an individual payment plan by mailing Form 9465 or even explore the possibility of getting some relief using OIC.

If you don't take action, then IRS may initiate the collection process, by using one or more of the steps like

->Filing a Federal Tax Lien on the property owned by tax payer. Once a lien is filed, the IRS will not relase it until all the taxes, penalties, interest, and recording fees are paid in full.

-> Serving a Notice of Levy. IRS may confiscate and sell property to satisfy a tax debt. Also your wages, bank accounts, Social Security benefits, and retirement income may be taken to pay tax debt. If your tax liability remains unpaid, the IRS may also levy assets such as your car, boat, or real estate.

->Offset of a refund. Any future federal and state income tax refunds that you are due will be offset by the amount you owe.

IRS will start using Private Collection Agencies for the collect of federal tax debts.

The American Jobs Creation Act signed by the President on October 22, 2004 permitts private collection agencies to collect federal tax debts.

Later this year private collection agencies will begin assisting with the collection of federal tax debts. The IRS has a growing backlog of cases in collection inventory and must take immediate action to reduce it.

The private collection agencies will not be authorized to take enforcement actions such as liens, levies or seizures. Nor will they work technical issues such as offers in compromise, bankruptcies, hardship issues or litigation. They will be assigned cases in which the taxpayer has not disputed the liability.

Democratic senators Byron Dorgan of North Dakota and Patty Murray of Washington are planning to introduce a legislation early next week to end the private debt collection program by Internal Revenue Service.
They were trying to gain bipartisan support for the bill, but it appears unlikely as many senators are supporting the program. They also planning to add an amendment to a pending Senate bill tp prevent the IRS from spending $54 million to start the system.

Those who support the program are also cautious about how IRS and private collectors protects taxpayers' rights.

The IRS says strict security policies are in place for the new program. About 40,000 accounts will be turned over by the end of the year. For the program's debut, the IRS chose taxpayers who owe less than $25,000 and don't dispute the debt. Letters to taxpayers from the firms will begin arriving mid-September.

Under the private debt collection program, IRS will choose 10 companies by 2008 with a goal of collecting $1.4 billion over 10 years. They already chose three companies CBE Group Inc., in Waterloo, Iowa, Linebarger Goggan Blair & Sampson LLP in Austin, Texas, and Pioneer Credit Recovery Inc., in Arcade, New York.

If your receive a letter from IRS stating your case has been assigned to a private debt collection agency, you still can continue deal directly with IRS by writing your intention to the collection agency.