For about three years, a lot of Michigan taxpayers with old IRS balances heard nothing at all. The notices stopped arriving. The phone stopped ringing. Then came the headlines about budget cuts and thousands of IRS employees walking out the door, and it was easy to assume an old tax debt had quietly gone away. It did not. IRS collection in 2026 is more aggressive than it was in 2022, not less, and Michigan taxpayers carrying balances from 2018 through 2023 are among the first to hear from the agency. Before that happens, it is worth understanding what changed and when to bring in a Michigan tax attorney.
This guide walks through why enforcement picked back up, what each IRS notice actually means, how a Supreme Court decision from June 2025 narrowed one of your best defenses, and what you can do about an old balance right now.
The IRS is smaller than it has been in years. The National Taxpayer Advocate reported that the workforce fell from roughly 102,000 employees to about 75,700 over a single year, a cut of about 27 percent. The agency’s own fiscal 2027 budget request seeks to shed several thousand more.
Most people read that as good news. It is not.
Fewer employees did not mean less collection. It meant a different kind of collection. The IRS responded by leaning harder on its Automated Collection System, the computerized machinery that generates balance-due notices, files liens, and issues levies without a human reviewing each case. Automation scales in a way that revenue officers never could. It does not take vacation, it does not retire, and it does not lose your file.
Two details make the point. First, the IRS classified its Automated Collection System teams as exempt during the October 2025 government shutdown, meaning collection kept running while other functions went dark. Second, the notices that were paused during the pandemic years came back online and have been reissued at volume.
The practical result for Michigan taxpayers is uncomfortable. There are fewer revenue officers available to negotiate with, longer hold times when you call, and slower processing on everything you file. The enforcement side, however, got faster.
If you have an unpaid federal balance, the notices arrive in a predictable order. Knowing the order tells you how much time you have left.
CP14 is the first formal bill. It states the balance, including penalties and interest, and typically gives you 21 days.
CP501 and CP503 are reminder notices. The tone escalates. The legal consequences do not change much.
CP504 is where people start to panic, and where many also make their biggest mistake. CP504 is labeled a Notice of Intent to Levy, and it does carry real teeth: the IRS can use it to seize your state tax refund, which for Michigan residents means your Michigan Department of Treasury refund is fair game. But CP504 is not the final notice, and it does not start your appeal clock.
LT11 or Letter 1058, is the one that matters most. This is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. Under IRC section 6330, it gives you 30 calendar days to request a Collection Due Process hearing. Thirty calendar days, not business days, and not 30 days from when you opened the envelope. Once that window closes, the IRS can levy your wages, your bank accounts, and other property without going back to court.
We see the same error over and over: someone treats CP504 as the emergency and the LT11 as just another form letter. It is exactly backward. For a fuller breakdown of the sequence, see our guide on how many notices the IRS sends before a levy and our page on IRS tax levies for what happens after the deadline passes.
If your assessment is two to eight years old and you have not heard from the IRS in a while, there is a specific reason your file is moving again.
Congress requires the IRS to hand certain overdue accounts to private collection agencies. According to the IRS, an account gets assigned when a year has passed with no interaction between you and the agency, or when more than two years have passed since assessment and the account was never assigned for collection. Read that again, because it describes the exact taxpayer who assumed the silence meant safety.
You will know it has happened because the IRS sends Notice CP40 first, followed by a letter from the assigned agency. The current contractors are CBE Group, Coast Professional, and ConServe. If anyone else contacts you claiming to collect for the IRS, treat it as a scam.
One reassuring point: private collection agencies cannot levy your bank account, garnish your wages, or file a lien. Only the IRS can do that, and it retains full authority to do so while your file sits with a contractor. Our page on what to do if the IRS sends your account to a private collection agency covers your options, including requesting that the case come back to the IRS.
A federal tax lien attaches automatically once the IRS assesses a liability, sends a bill, and you fail to pay. Filing a Notice of Federal Tax Lien makes it public, which is when it starts affecting your credit, your ability to refinance a home in Oakland County, and your ability to sell business assets. Liens can be discharged, subordinated, or withdrawn, but none of that happens on its own. Our tax lien page explains the mechanics.
For 2026, the IRS may certify a debt as seriously delinquent when the total exceeds $66,000, including penalties and interest, up from $64,000 in 2025. Certification goes to the State Department, which can deny a passport application, refuse a renewal, or revoke an existing passport. The IRS sends Notice CP508C when it certifies. Interest and penalties compound quickly, so a balance that was well under the threshold when you stopped opening the mail may be over it now.
The IRS has 10 years from the date of assessment to collect, under IRC section 6502. That is the Collection Statute Expiration Date, or CSED, and a fair number of people quietly plan around it.
That plan usually backfires. The 10-year clock pauses for a list of common events: while an Offer in Compromise is pending, while a Collection Due Process request is pending, during bankruptcy, and during extended periods outside the country. Taxpayers who spend years filing hopeful paperwork often extend their own deadline without realizing it. Meanwhile, the balance keeps growing.
Michigan runs a separate clock on a separate schedule. Under MCL 205.27a, the Michigan Department of Treasury generally has six years from assessment to collect, with its own set of extension provisions. Six years, not ten. These are two different debts with two different timelines, two different collection agencies, and two different resolution programs.
This is worth stating plainly: settling with the IRS does not settle your Michigan state tax debt. Michigan operates its own Offer in Compromise program, entirely separate from the federal one, and a federal acceptance carries no weight in Lansing. If you owe both, you need two strategies running in parallel.
On June 12, 2025, the Supreme Court decided Commissioner v. Zuch by an 8 to 1 vote, and it narrowed one of the strongest tools taxpayers had.
The holding: the Tax Court’s jurisdiction under section 6330 ends once the IRS is no longer pursuing the levy. In the case itself, the IRS applied later overpayments to the disputed balance, dropped the levy, and the Tax Court lost the authority to decide whether the taxpayer had actually owed the money in the first place.
For someone with an old Michigan balance, the practical takeaway is simple. The Collection Due Process hearing is a narrower window than it used to be, and it is a window the IRS can partly close on its own timing. If you plan to dispute how much you owe, the time to raise it is inside the 30 days after the LT11 arrives, with a complete file and a real argument, not two years later. If your underlying dispute is about an examination rather than collection, that belongs in a different track, and our tax audit page explains how that process works.
Consider a self-employed contractor in Royal Oak. In 2019 the IRS assessed $38,000 against him after he underreported income across two years. He made a couple of payments, then stopped, moved twice, and heard nothing after 2021.
In February 2026 he receives a CP40 telling him the account has been assigned to a private collection agency. In April he gets a letter from that agency. He ignores both, on the theory that a private company cannot do anything to him. That part is technically correct.
In June the IRS issues an LT11. He has 30 days to request a Collection Due Process hearing. He does not open it for six weeks. By August his bank account is levied and the balance, with penalties and interest, has grown past $61,000. He is now also over the passport certification threshold.
Had he responded to the CP40 in February, he had roughly five months to assemble financials, evaluate an installment agreement against an Offer in Compromise, and, if the numbers supported it, request Currently Not Collectible status. Instead he lost every option except negotiating a levy release after the fact, which is slower, more expensive, and less likely to end well.
This example is illustrative only and does not describe an actual client. Prior results do not guarantee a similar outcome.
Once you know the numbers, the realistic paths are these. A guaranteed installment agreement is available under $10,000. A streamlined installment agreement covers balances under $50,000 without full financial disclosure. Anything over $50,000 requires a complete financial statement. Currently Not Collectible status suspends active collection when you cannot cover basic living expenses, though it is worth understanding that interest and penalties keep accruing and the debt does not go away. An Offer in Compromise settles the debt for less than the full amount, but only where the facts support Doubt as to Collectibility, Doubt as to Liability, or Effective Tax Administration. The IRS accepts roughly 30 to 40 percent of offers submitted, the application fee is $205 with a low-income waiver available, and the agency has 24 months from receipt to act. No firm can guarantee that an offer will be accepted, and anyone who tells you otherwise is selling something.
Our team includes licensed attorneys, CPAs, Enrolled Agents, and former IRS revenue officers. That last group matters more than it sounds. When you are trying to predict what the IRS will do with a 2019 assessment that just moved back into active collection, it helps to have people who spent years making those decisions from the other side of the desk.
We work out of Lathrup Village, serving Oakland County and the greater Detroit metro, with a second office in Delray Beach, Florida. We handle federal collection matters and Michigan Department of Treasury matters, which are genuinely different processes.
One important limit: Levy & Associates does not represent clients in criminal tax matters whatsoever. Our practice is civil only. If your situation involves a criminal referral or investigation, you need criminal defense counsel, and we will tell you that directly rather than take the case.
If you have an old IRS balance and the notices have started again, the worst thing you can do is wait for the next envelope. The team at Levy & Associates is ready to help. Our attorneys, CPAs, and former IRS revenue officers understand exactly how automated collection escalates because many of us worked on the IRS side of these cases. Call us at (248) 557-4048 or contact us online for a free consultation.
No. The IRS workforce shrank by roughly 27 percent over the past year, but collection activity increased rather than decreased. The agency shifted to automated collection, which issues notices, files liens, and executes levies without a revenue officer assigned to your case. Old balances that went quiet during the pandemic pause are now cycling back into active collection.
CP504 is a Notice of Intent to Levy that primarily allows the IRS to seize your state tax refund. It does not start your appeal clock. LT11, also issued as Letter 1058, is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. It gives you 30 calendar days under IRC section 6330 to request a Collection Due Process hearing, after which the IRS can levy wages and bank accounts.
No. Private collection agencies working for the IRS cannot file liens, garnish wages, or levy accounts. Only the IRS holds that authority, and it keeps that authority while your file is with a contractor. The IRS will always send Notice CP40 before an agency contacts you, so treat any other unannounced contact as a likely scam.
Rarely, and it is a risky plan. The 10-year period under IRC section 6502 pauses during a pending Offer in Compromise, a pending Collection Due Process request, bankruptcy, and extended time abroad. Taxpayers frequently extend their own deadline without realizing it while penalties and interest continue to build.
No. Federal and Michigan tax debts are separate obligations with separate collection statutes. Michigan generally has six years from assessment under MCL 205.27a, compared with the federal 10 years, and Michigan runs its own Offer in Compromise program. A federal settlement has no effect on a state balance.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.