IRS collection shifts shape as technology and courts tighten options
As audits recede, collection is becoming the front door of enforcement, not the back end.
The IRS is reshaping how it collects unpaid tax. Personnel cuts and shutdown disruptions have not slowed collection activity. Instead, the agency is leaning harder on automated systems, advanced analytics, and artificial intelligence.
At the same time, a recent Supreme Court decision narrows how taxpayers can dispute liabilities once they enter the collection process.
The Law in Play
IRS collection authority sits mainly under §§6320 and 6330, which govern liens, levies, and Collection Due Process hearings. These rules allow taxpayers to raise liability challenges in collection only if they had no prior opportunity to do so.
In Zuch v. Commissioner, the Supreme Court held that the Tax Court lacks jurisdiction over a CDP case once the IRS abandons a levy action because the liability has been paid. The Court ruled 8–1 that payment eliminates the live controversy required for review.
The IRS position is that refund suits remain available. Taxpayers counter that refund litigation is slower, more expensive, and often unrealistic for minor disputes.
Timeline
1998: Congress enacted CDP rights under the IRS Restructuring and Reform Act.
2000: The Federal Payment Levy Program launched.
2017–2023: IRS Collection expanded analytics-driven case selection.
June 2024: The Supreme Court decided Zuch v. Commissioner.
October 2025: The IRS released its FY 2026 Lapsed Appropriations Contingency Plan.
Present: Collection notices and automated enforcement remain active despite staffing constraints.
The Larger Story
Collection has become the IRS’s most reliable enforcement channel. Automated notices, liens, levies, and payment offsets generate steady revenue at low marginal cost. Audit activity requires people, time, and procedural safeguards. Collection relies on systems.
Leadership signals reinforce the shift. Treasury Secretary Scott Bessent has emphasized collection, IT modernization, and customer-facing automation. The IRS contingency plan confirms that the Automated Collection System and Special Compliance Personnel functions remain operational even during shutdowns.
This environment favors volume, speed, and standardization. It also increases the risk that processing errors move taxpayers into collection before disputes are resolved.
Enhancing IRS Collection With Technology
Collection has used predictive scoring for years to determine who is likely to pay and at what cost. What is changing is speed and scale.
AI-assisted analytics now allow rapid testing and redesign of notices. Improvements that once took months can happen in weeks. Voice bots using natural language processing already handle millions of calls and set up payment plans at a fraction of historical costs.
Digital self-service tools allow taxpayers to authenticate, view accounts, and establish installment agreements without human interaction. Expansion into additional languages will be far cheaper than traditional staffing models.
Field revenue officers remain essential, but their focus is narrowing. Complex business cases, employment tax issues, fraud indicators, and high-wealth nonfilers still require in-person investigation. Routine balance-due cases increasingly do not.
Examples of Change
ERC reclamation cases. Some ERC disputes have moved directly into collection due to missed or mishandled protests. In federal contractor cases, the Federal Payment Levy Program can offset government payments while a CDP notice is in effect. Levy action is not paused by later CDP or equivalent hearing requests. Even when levies are reversed, refunds can take months.
General business credits. Processing errors that overlook credits claimed on filed returns can generate balance-due notices with no immediate appeal rights. Taxpayers may enter the CP 504 or 504B stream while still owed refunds. Blocking FPLP becomes urgent to preserve cash flow.
These cases illustrate how automation compresses timelines. Errors propagate faster. Cash consequences arrive sooner.
What It Means in Practice
Respond to early notices quickly. Each notice window narrows resolution options.
Assume automated enforcement will proceed unless affirmatively stopped.
Use Collection Appeal Program requests early, where possible, to prevent liens.
Treat FPLP exposure as a cash management risk, especially for federal contractors.
Preserve CDP rights by filing timely requests before balances are paid in full.
Next Steps
Congress has introduced legislation that would restore CDP review rights when liabilities are paid, but no fix is in place yet.
Practitioners should monitor IRS guidance on expanded math error authority and ERC recovery procedures. Collection analytics and notice redesign will continue through the 2026 budget cycles.