What Taxpayers Must Know About the IRS 10 Year Statute of Limitations
How long can the IRS collect back taxes?
In general, the Internal Revenue Service (IRS) has 10 years to collect unpaid tax debt. After that, the debt is wiped clean from its books and the IRS writes it off. This is called the 10 Year Statute of Limitations. It is not in the financial interest of the IRS to make this statute widely known. Therefore, many taxpayers with unpaid tax bills are unaware this statute of limitations exists.
In addition, like most IRS rules, the nuances of the statute can be complex and difficult to understand. This article explains what tax debtors need to know to decide if it is financially advantageous for them to “wait out the IRS”. This option must be prepared for the IRS to leverage all its legal tactics to collect during that period. Toward the end of the Collection Statute Expiration Date (CSED), the agency will likely become even more aggressive in its collection actions. The IRS agents could take on the role of both “bad cop” and “good cop”. The latter could include offering “deals”.
One typical one is creating an installment payment plan:
At first glance it may seem attractive. In exchange, tax debtors will sometimes have to agree to extend the CSED. Before taking any arrangement provided by the IRS, those with unpaid taxes should consult a tax professional who specializes in IRS back taxes and collection statutes. The 10-year period is supposed to begin when the tax is assessed. However, there are frequently disputes on that timing between tax debtors and the IRS.
The agency has been known to calculate the CSED differently than debtors. Sometimes this occurs when the debtor did not pay taxes in full or only partially for several years. There may be questions as to what year the assessment of debt began. Fortunately, there are ways for debtors to have the IRS agree, at the front end, on the CSED. One is to present your situation to a tax expert before approaching the IRS – see more below.
In addition, the clock could be stopped temporarily ( known as “tolling the statute of limitations” ) for a variety of reasons:
- Bankruptcy filing
- Offer in Compromise filing
- Appeals filing
- Filing a lawsuit against the IRS
- Being out of the country for at least 6 months
- Signing a waiver to extend the CSED
- Military deferments, and more…
Afterwards, the clock will start up again, but not always immediately. For the bankruptcy case, it will take an additional 6 months after settlement. Of course, when the clock is not running, the CSED is delayed, and thereby extended.
When the statute of limitations expires, the IRS may not notify taxpayers. That must be tracked by taxpayers themselves or their tax relief professional. Also, it is their own responsibility to obtain documentation from the IRS that the tax debt no longer exists.
Once that is confirmed, a tax relief professional can assist the taxpayer in having the IRS issue an official Certificate of Release of Federal Tax Lien or a Lien Withdrawal. Proof of a lien release or withdrawal is usually needed to present to institutions who determine credit-worthiness. It is a first step taxpayers can take to repair their financial profiles.
The “waiting it out” strategy is not recommended for all tax debtors, however. The 10-year period is a long time. Some, for example, may not be able to continue to operate their business with the standard measures enforced by the IRS to collect. Attempting to utilize an imminent CSED as an IRS tax debt strategy should only be considered while under the guidance of a licensed tax relief specialist like Landmark Tax Group.
What other options are there?
There are several. One is to have a tax relief professional negotiate with the IRS a potential reduction in the total tax debt. Another is to have that tax expert establish with the IRS an installment payment plan that is financially feasible and that takes advantage of the CSED. A third is to have the tax relief professional present a hardship case to the IRS.
During that process, a tax professional can request that the IRS stop collection procedures ranging from liens on property to garnishment of wages. Being in debt to the IRS does not mean being in continual financial distress. There are proven ways to manage IRS tax debt. However, a common error for those unable or unwilling to pay their taxes is to simply do nothing.
Research and experience both show people who consult with a tax relief expert early on have fewer financial, business and personal repercussions. Fortunately, most tax relief professionals like Landmark Tax Group provide confidential consultations prior to full-on representation. During the consultation, a tax debtor and tax professional can together understand the scope of the tax problem, discuss the precise options available, and determine how to best resolve the matter together.
Frequently Asked Questions
The statute of limitations begins on the day the IRS officially “assesses” the tax on your tax return – that is, puts your taxes due on the books. Even if you choose not to file, the IRS can file a substitute return on your behalf, and then start their collection efforts. A taxpayer or their Tax Representation will have to contact the IRS to determine the official Collection Statute Expiration Date for each tax period.
Generally, the IRS has 10 years to collect taxes from you. Once the time is up, the IRS can no longer collect on that debt. In theory, this rule seems simple, but the collection statute has some guidelines that can prolong or extend the period. Be sure contact us for immediate assistance.
The statue may lengthen if it is suspended for one or more periods. The suspension period will not count towards the 10 years. Suspensions can happen for several reasons, such as filing bankruptcy, apply for an installment agreement or an offer in compromise, requesting innocent spouse relief, or while you live outside the U.S. continuously for at least six months, and more. In some cases, you will be asked by the IRS to extend the ten years voluntarily. Cases will vary on whether it is beneficial to extend (usually not) or let time run out. Be sure contact us for immediate assistance.
Get in touch with us by email or call us at 949-260-4770. Landmark Tax Group is operated by Michael Raanan, MBA, E.A., who is an IRS-licensed Tax Relief Specialist, Enrolled Agent and former Senior IRS Agent. While working over 16 years at the IRS and in private practice helping taxpayers like you, Michael has personally resolved thousands of back tax cases and settled over $100 million dollars worth of tax cases.
Depending on your needs, Landmark Tax Group can help you determine your IRS Collections Statute Expiration Date, check your case status with the IRS, determine a plan to resolve your IRS Collections case, and more. You will have the option of getting guidance on how you can perform a status check yourself and how to have us do it for you. Be sure contact us for immediate assistance.
What To Do Next
Instead of paying $5,000 and up for a full-time Tax Representative, you may be able to represent yourself with some expert guidance. To go over step-by-step instructions on exactly what needs to be done and how to do it yourself, and to save thousands of dollars in professional fees, click here to see how your IRS Strategy Session can resolve your tax problem. Millions of taxpayers pay less to the IRS every year – will you be one of them?