When you owe money to the IRS, are you on the hook forever?
Fortunately, the answer is usually “no.”
As a general rule, there is a ten-year statute of limitations on IRS collections. This means that the IRS can attempt to collect unpaid taxes for up to ten years from the date they were assessed. Subject to some important exceptions, once the ten years are up, the IRS has to stop its collection efforts.
If your Collection Statute Expiration Date (CSED) is near, the IRS may act aggressively to get you to pay as much as possible before the deadline or agree to extend it.
When Does the Limitations Period Begin?
The ten-year limitations period begins to run on the date of the tax assessment. This is the date an IRS official signs the applicable form at an IRS Service Center. For example, if you do not pay in full when you file your tax return, you will receive written notice of the amount you owe, a bill. The date on this bill starts the ten-year limitations period. If you did not file a tax return, the IRS can create a substitute return for you and make a deficiency assessment, which starts the ten year period. If you do not file a return, the statute does not begin to run unless the IRS files one for you. It is good practice to always file a return, even if the taxpayer is not required to do so. This will start the statute of limitations running.
Suspension of Limitations Period
The ten-year collection period can last more than ten years because it can be suspended for one or more time periods. The time during which the statute of limitations is suspended is not counted toward the ten-year deadline. For example, the collections period will be suspended during time periods the IRS is legally barred from taking collection action, for example during bankruptcy. The period is also suspended while the IRS is considering your request for an installment agreement, offer in compromise, or request for innocent spouse relief, or while you live outside the U.S. continuously for at least six months.
Voluntarily Extending the Limitations Period
The ten-year limitations period can be extended if the taxpayer agrees to do so. For example, if a taxpayer enters into an installment agreement, the taxpayer will likely have to sign a form waiving the ten-year limitations period. But this extension can be no more than six years. If the limitations period is nearing its end and you still owe the IRS substantial money, IRS personnel may offer you an installment agreement with attractive terms in order to get you to agree to extend the collection deadline. Consider carefully before agreeing to any such extension. You may be better off refusing to extend the deadline and let the IRS collect whatever it can before it runs out.
For tax law assistance, you can feel comfortable turning to Jeffrey R. Siegel, Esq. Our tax relief attorney can get you out of the toughest IRS bind. Call our tax resolution services today.