8 Common IRS Tactics You Need To Know

The IRS has a fearsome reputation, and some of it is earned. But many taxpayers delay dealing with a tax problem because of what they think the IRS will do. Here’s what the IRS can actually do, and what usually happens, from a tax resolution firm’s perspective.

If you’re facing any of these, call Diehl CPA at (907) 313-6933 for a free, no-obligation consultation. Contact us.

1. Seizing Your Home or Assets

Reality: The IRS can file a federal tax lien against everything you own, and it regularly does. Seizing a principal residence is rare: it requires approval from a federal district court judge or magistrate, and the IRS must first consider other ways to collect. More common actions are wage levies, bank levies, and levies on accounts receivable for business owners. A second home, rental property or vehicles don’t get the same protection.

2. Jail Time for Unpaid Taxes

Reality: Simply being unable to pay isn’t a crime. Criminal cases involve willful conduct, such as willful failure to file (a misdemeanor under IRC 7203, punishable by up to one year per year not filed), tax evasion, or filing false returns. Prosecution is rare compared with civil collection, but it does happen, especially for people who ignore years of filing requirements or hide income. Filing all required returns, even if you can’t pay, is the most important protective step.

3. Garnishing Your Entire Paycheck

Reality: A wage levy is continuous, and it can take a large share of your pay. The IRS must leave you an exempt amount, based on your standard deduction and number of dependents, and takes the rest. For many people that leaves very little to live on, which is why getting an installment agreement or other resolution in place before a levy hits is so important.

4. Freezing Your Bank Accounts

Reality: Before most levies, the IRS must send a Final Notice of Intent to Levy and give you 30 days to request a Collection Due Process hearing. A bank levy is a one-time seizure of what’s in the account that day. The bank must hold the funds for 21 days before sending them to the IRS, which gives you a window to resolve the issue or prove hardship.

5. Never-Ending Interest and Penalties

Reality: Interest compounds daily at a rate the IRS resets each quarter (the federal short-term rate plus 3 percentage points). Penalties also add up. Failure-to-file and failure-to-pay penalties can each reach 25%. Relief is available, though. First-time abatement and reasonable cause can remove penalties, and penalties stop growing once they reach their maximum. See Understanding Tax Penalties.

6. Losing Your Passport

Reality: The IRS certifies “seriously delinquent” tax debt to the State Department, which can deny or revoke a passport. For 2026 that means more than $66,000 in assessed tax, penalties and interest, after a lien filing or levy, according to the IRS. You won’t be certified if you’re in an installment agreement, have an accepted offer in compromise, or have a pending Collection Due Process hearing or innocent spouse claim.

7. Endless Audits

Reality: An audit focuses on specific issues in specific returns, and it doesn’t automatically lead to more audits. If the examiner finds the same issue in other years, though, they may expand the audit to prior and later returns. Generally, the IRS has three years from filing to assess additional tax, six years if you substantially understated income, and no limit for fraud or unfiled returns. See Navigating an IRS Audit.

8. Shutting Down Your Business

Reality: The IRS can seize business assets, but it usually prefers payment arrangements that keep the business operating. Unpaid payroll taxes are the exception to the IRS’s patience. The withheld income tax and employee share of Social Security and Medicare are “trust fund” taxes, and the IRS can assess the Trust Fund Recovery Penalty against owners and others responsible personally.

The Bottom Line

The IRS has broad collection powers, but it also has to follow procedures, and there are options at almost every stage: installment agreements, offers in compromise, currently-not-collectible status, penalty relief and appeals. The worst choice is ignoring the notices.

Get Help From Diehl CPA

IRS collection and appeal procedures have strict deadlines, and what you submit becomes part of the record. Diehl CPA, led by Mark Diehl, CPA, CFE, represents taxpayers before the IRS and can prepare the forms, gather the documentation, and deal with the IRS for you. Learn about our tax relief services or contact us to talk through your situation.

This article is general information, not tax or legal advice for your specific situation. Updated October 2026.