An IRS restitution payment in a criminal tax case goes to the Clerk of the U.S. District Court, which forwards it to the IRS to credit against a separate account the IRS opens for the court-ordered amount. That crediting keeps the government from collecting the same dollars twice, but it rarely closes your IRS file. Civil penalties and interest on the underlying tax almost always leave a balance the IRS continues to pursue on the civil side.
How the Court Order Becomes an IRS Assessment
Once the criminal case reaches final adjudication and appeals are exhausted, the IRS converts the court-ordered restitution into a Restitution-Based Assessment, or RBA. Federal law requires the IRS to assess and collect the amount “in the same manner as if such amount were such tax,”1govinfo. 26 USC 6201 – Assessment Authority which puts the full set of collection tools, including liens and levies, behind it.
Timing follows the appeal posture. If you waived appeal at sentencing, final adjudication is the sentencing date. If you did not, it is the day after the 14-day appeal window closes. Criminal Investigation must notify the IRS civil functions within 30 days of that date. One exception matters: if restitution was ordered solely as a condition of supervised release or probation, the IRS will not make the assessment until you are actually under a probation officer’s supervision.2Internal Revenue Service. Internal Revenue Manual 25.26.1 – Criminal Restitution and Restitution-Based Assessments
The IRS tracks the RBA on a dedicated MFT 31 account, separate from your original civil tax account for the same years.3Internal Revenue Service. Restitution-Based Assessments Processing Because both accounts trace to the same underlying tax debt, any payment that reduces the RBA is also credited against the matching civil liability for the same tax type and period.2Internal Revenue Service. Internal Revenue Manual 25.26.1 – Criminal Restitution and Restitution-Based Assessments That is the mechanism that prevents double collection.
The RBA itself does not automatically accrue underpayment interest or failure-to-pay penalties. Those can be added only if the sentencing court’s judgment or the plea agreement specifically includes them. The civil account is different. Interest on unpaid civil tax runs from the original due date of the return until the balance is fully paid.4Office of the Law Revision Counsel. 26 USC 6601 – Interest on Underpayment, Nonpayment, or Extensions of Time for Payment, of Tax
How to Make Restitution Payments
Payments do not go directly to the IRS. You send them to the Clerk of the U.S. District Court that sentenced you, and the Clerk’s Office forwards the money to the IRS for credit against your RBA.5U.S. Department of Justice. Restitution Process Checks, money orders, and electronic transfers made payable to the Clerk are generally accepted.
Every payment needs your full name, the court docket number, and the tax periods covered by the restitution order. Missing information can delay processing or land the money in the wrong account. Recovering credit for a misapplied payment is far harder than labeling it correctly the first time.
If you are on supervised release or probation, your U.S. Probation Officer typically manages the schedule and monitors compliance. The payment schedule is set at sentencing based on your financial resources, income, and obligations.6Office of the Law Revision Counsel. 18 USC 3664 – Procedure for Issuance and Enforcement of Order of Restitution If your circumstances change significantly, you are required to notify the court and the Attorney General, and the court may adjust the schedule.
How the IRS Applies Each Payment
The IRS treats restitution as an involuntary payment and applies it in a fixed order: tax principal first, then penalties, then interest. The allocation is not negotiable. Once the principal attributable to the restitution is retired, failure-to-pay penalty accrual on that portion stops. Any principal not covered by restitution keeps generating penalties and interest, and civil fraud penalties on the underlying account are unaffected by payments directed to the RBA.
Why Paying Restitution Rarely Zeroes Out Your IRS Balance
Restitution covers the tax loss the court identified. It does not cover what the IRS can add on the civil side. The examination team reviews the case after the RBA is established and recommends civil penalties, including the 75% civil fraud penalty on the underpayment.2Internal Revenue Service. Internal Revenue Manual 25.26.1 – Criminal Restitution and Restitution-Based Assessments Those civil assessments stand on their own and survive full payment of the RBA.
Interest compounds the problem. Because a criminal tax case often spans several years between the returns at issue and the restitution order, interest running from each original due date can be substantial by the time you start paying. Add the fraud penalty, and the civil balance can exceed the restitution amount. An Offer in Compromise may be available for the civil penalties and interest, even though, as discussed below, it cannot be used for the RBA itself.
What You Cannot Do With an RBA
Several options taxpayers usually assume they have are not available for restitution-based assessments.
No Tax Court Petition
A notice of assessment for restitution is not a notice of deficiency and cannot be petitioned to Tax Court.3Internal Revenue Service. Restitution-Based Assessments Processing Federal law also bars any challenge to the RBA amount “on the basis of the existence or amount of the underlying tax liability” in an IRS proceeding or a suit under the tax code.1govinfo. 26 USC 6201 – Assessment Authority The time to dispute the number was at sentencing.
No Offer in Compromise
The IRS lacks authority to compromise court-ordered restitution, and RBAs cannot be included in an Offer in Compromise.3Internal Revenue Service. Restitution-Based Assessments Processing Only the sentencing court can modify the restitution order. Civil penalties and interest on the separate civil account may still be eligible for an OIC.
No Bankruptcy Discharge
Criminal restitution ordered under Title 18 is nondischargeable in bankruptcy.7Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge Filing does not eliminate the RBA. The underlying civil tax assessments for the same years may qualify for discharge depending on their age and other factors, but the RBA itself survives.3Internal Revenue Service. Restitution-Based Assessments Processing
No Statute of Limitations on Assessment
The three-year assessment window that applies to ordinary tax does not apply here. The assessment period for RBAs is unlimited under IRC 6501(c)(11).8Internal Revenue Service. Internal Revenue Manual 4.8.6 – Criminal Restitution and Restitution-Based Assessments The government can also start court proceedings to collect the restitution amount at any time without first making a formal assessment.2Internal Revenue Service. Internal Revenue Manual 25.26.1 – Criminal Restitution and Restitution-Based Assessments
Enforcement If You Fall Behind
Missing payments triggers action from two directions at once.
Criminal Court
If you are on supervised release or probation, missed payments can lead to a revocation hearing. The court also has authority to hold you in contempt, enter a restraining order, order the sale of property, or impose any other measure it finds necessary to compel payment.9Office of the Law Revision Counsel. 18 USC 3613A – Effect of Default The court weighs your employment, earnings, financial resources, and whether the failure to pay was willful.
Civil Lien and Collection
A restitution order creates a lien in favor of the United States on all your property and rights to property, treated as a federal tax lien. It arises when the court enters judgment and continues for 20 years or until the liability is satisfied. Your overall liability to pay terminates on the later of 20 years from entry of judgment or 20 years after release from prison.10govinfo. 18 USC 3613 – Civil Remedies for Satisfaction of an Unpaid Fine
The government can enforce the judgment using the tools available for any federal civil judgment, including wage garnishment subject to the Consumer Credit Protection Act limits, bank levies, and seizure of non-exempt property.10govinfo. 18 USC 3613 – Civil Remedies for Satisfaction of an Unpaid Fine The Federal Debt Collection Procedures Act reinforces those tools; its definition of “debt” specifically includes restitution owed to the United States.11govinfo. 28 USC 3001 – Federal Debt Collection Procedures Act The U.S. Attorney’s Financial Litigation Unit handles active enforcement.