Do you owe back taxes to the Internal Revenue Service (IRS)? You may be wondering how long the IRS can pursue you before the debt is no longer collectible. Read on to know more about the statute of limitations on IRS collections, instances where it can be stopped and how to move forward with resolving what’s owed in taxes.
Unpaid Taxes and the IRS
Taxpayers who don’t meet obligations on their taxes may owe penalties. This can include:
- Not filing your tax return on time
- Failure to pay any tax you owe before the deadline and in the right way
- Preparing an inaccurate return
- Providing inaccurate information returns
The IRS charges you a monthly interest on any penalty you don’t pay in full until the debt is settled. That is why you need to understand these different penalties, what you need to do, and how to avoid getting one.
Is There an Expiration Date on IRS Tax Debt?
When does IRS tax debt expire? Or does IRS debt expire? Both are valid questions if you owe back taxes.
Per IRS rules, the IRS will have ten years from the date the taxes were assessed to collect the unpaid balance. This is typically on the day the IRS generates a notice or tax bill, an IRS officer or IRS agent signs off on it at the IRS Service Center, and the IRS sends it to you by mail.
If you haven’t yet filed a return for the period taxes are being assessed, the IRS will generate what’s referred to as a substitute return. Based on the figures included in the return, a deficiency tax assessment or estimate of what you owe is the amount the agency will attempt to collect. The deficiency assessment is calculated using income information reported to the IRS by third parties.
Once the 10-year period expires, the IRS can no longer pursue you for the unpaid tax debt. This means you’ll no longer owe back tax or any additional interest and penalties assessed during the collection period. The agency must also remove the debt from its books.
However, there are exceptions to the rule that allows the IRS to extend their collection efforts. More on these shortly.
The Collection Statute Expiration Date (CSED)
As the CSED date draws near, it’s not unusual for the IRS to ramp up collection efforts. Their end goal is to collect what’s owed, and the agency will go to extra lengths to recoup back taxes before the deadline.
Ultimately, the agency’s goal is to collect a large percentage, if not all, of what’s owed before CSED. And if that’s not possible, the IRS could go to extra lengths to try and have the CSED extended, which gives them a greater chance of collecting at some point in the future.
Can The Expiration Date Be Tolled?
Some circumstances may warrant the suspension of the statute of limitations, which means the ten-year collection period comes to a halt. In turn, the IRS has even more time to collect back taxes from you.
If you file for bankruptcy, in federal court, the IRS will be prohibited from pursuing collection on back taxes if the bankruptcy court issues an automatic stay. You can expect the suspension to remain intact from the time the bankruptcy case commences until six months after it ends.
Filing an Appeal/Lawsuit
Did you receive an income tax bill from the IRS that you disagree with? Filing an appeal can also extend the statute of limitations.
Offer in Compromise
Whenever you submit an Offer in Compromise to the IRS, it could take some time to receive a decision. In the meantime, the statute of limitations will be suspended while the IRS considers your request.
Out of Country Status
Relocating outside the U.S. for six or more consecutive months also halts the statute of limitations.
Military deferments also toll the statute of limitations, per the Service Members Civil Relief Act of 2003. Members of the armed forces receive a deferral of up to 180 days if the military service material affects their ability to pay or if they’re currently serving in a combat zone.
You can opt to extend the statute of limitations for up to six years, although it is not mandatory. However, some individuals are convinced by the IRS to enter into an installment agreement that allows partial payment for what’s owed, and they could inadvertently extend the collection period. But it may be required if you set up an installment agreement with the IRS that allows you to remit monthly payments over time.
How To Resolve Your Tax Debts
It can be overwhelming to resolve your tax debts, particularly if you owe a hefty amount to the IRS. Fortunately, you don’t have to struggle alone or in silence.
Reputable firms, like Larson Tax Relief, provide solutions to individuals and businesses with tax problems who are seeking ways to save money, time and the stress that comes with dealing with federal taxing authorities.
Larson Tax Relief’s team of experts, which includes 18 Enrolled Agents, can also help you get a handle on state tax issues. With over 18,000 happy clients in 50 states to date, they have the expertise needed to help you reach a practical and fair resolution.
If you owe over $25,000 to federal or state tax authorities, submit your details in this simple form to request a free consultation.
Frequently Asked Questions
Below are some frequently asked questions regarding the expiration of IRS tax debt.
The IRS statute of limitations on tax debt in the United States refers to the amount of time the agency has under federal law to collect back taxes from you. In most instances, the statute of limitations is up to 10 years for tax debtors. The date of assessment begins when the IRS creates a tax bill or notice, and an agent signs off on it internally.
Yes, there are scenarios that can trigger the extension of the 10-year statute of limitations. For example, the CSED can be tolled if you file for bankruptcy or file an appeal against the IRS if you disagree with the amount owed in the tax notice. In addition, if you submit an Offer in Compromise, or a request to the IRS to settle for less than what’s owed, it will also trigger a suspension. Or you could extend the time period if you’re out of the U.S. for more than six consecutive months, you’re referred to military service that affects your ability to pay for more than 180 days, or you agree to enter into a voluntary extension.
Unfortunately, calling the IRS directly likely won’t yield you much success. So you’ll need to refer to your IRS account transcript to calculate your own CSED.
No, the IRS will not send out a notification regarding the expiration of your tax liability. But you can confirm this information by requesting a copy of your IRS account transcript online, by phone or by mail.
Start by confirming that your CSED has actually passed. Then, refer to your IRS account transcript to ensure it reflects a zero balance. Finally, a Release of Federal Tax Lien should be filed (if applicable).
When you enter into an installment agreement with the IRS, you’re required to waive the statute of limitations. So while paying off back taxes over time may seem like a viable option, consider consulting with a tax professional first for legal advice to ensure it’s the right course of action for your financial situation.
Yes. A tax professional, tax expert or tax attorney can help you navigate the IRS’ rules and regulations regarding back taxes. Tax relief professionals also provide expert advice regarding strategies to best resolve back taxes.