IRS STATUTE OF LIMITATIONS
For all taxpayers, an important rule to know is the IRS statute of limitations with all its nuance and details. In theory, the statute seems simple enough; however, there are some guidelines that can prolong or extend the period for paying back taxes which you owe.
Once the IRS statute of limitation is up, the IRS will no longer be able to collect on its debt, but the concept is not as simple as just merely allowing the clock to run out. Therefore, if you owe back taxes, your best bet is to contact us at Dallo Law Group to ensure your unique circumstances are all taken into consideration. For example, in cases such as fraud or bankruptcy, the game changes. Our tax attorneys and CPAs are equipped with an array of various expertises in the area of tax return statute of limitation. Do not hesitate to reach out to us for the best advice on how to handle your unpaid tax debt.
IS THERE A STATUTE OF LIMITATIONS ON TAXES?
Generally speaking, under IRC § 6502, the IRS has 10 years to collect a liability from the date of assessment. Once this statute of limitations has expired, the IRS may no longer go after you for taxes that you owe. First, it is important to note what exactly is meant by “date of assessment,” which is April 15th of the year your taxes were due or the date your return was actually filed – whichever date is later is when the clock begins ticking.
Secondly, an assessment is made when your tax liability (gross income minus qualified deductions) is recorded and signed by an assessment officer in the office of the Secretary of the Treasury in accordance with the laws approved by the Secretary.
THE COLLECTION STATUTE EXPIRATION DATE (CSED)
For the purpose of back tax collection, the IRS statute of limitations is known as the collection statute expiration date (CSED). It will always appear in IRS accounting records and will alert collections officers that the date has been decided. In a nutshell, the CSED is established once your tax assessment has been determined and it also states when the government’s right to pursue collection of tax liability finishes or the IRS statute of limitation ends.
TOLLING THE STATUTE OF LIMITATIONS
It is important to note that a taxpayer’s action may actually extend the IRS statute of limitations. There are certain scenarios where the CSED may extend depending on your individual case and actions. These include:
FILING FOR BANKRUPTCY
Commonly, the IRS statute of limitations is suspended during the automatic stay period of the bankruptcy proceedings, plus six months after the bankruptcy discharge date. The time extension does not include tax debt discharged in the bankruptcy.
While a proposed installment agreement is pending, the IRS statute of limitations is put on hold. Likewise, during the appeals process if the proposed agreement was rejected and a timely appeal was submitted the same is the case. If a proposed installment agreement is rejected or terminated, the IRS statute of limitations suspension is extended for an additional thirty days.
OFFER IN COMPROMISE
If you decide to file an offer in compromise (OIC), your CSED will be extended for its duration plus an additional 30 days. Sometimes the IRS is limited from levying and the CSED will be suspended while an OIC remains pending, will be suspended for 30 days after the rejection of an OIC, and will be suspended during the period of an appeal of a rejection.
COLLECTION DUE PROCESS (CDP) HEARING
Once you submit a CDP and the agency receives it, the IRS statute of limitation is suspended and until the date the determination from court appeals becomes final. It is important to remember that the CSED remains suspended even if you paid the tax in full, as long as you are still disputing the payment. On the other hand, if you withdraw your CDP hearing request, the IRS statute of limitation will continue as of the date of withdrawal.
INNOCENT SPOUSE REQUEST
The IRS statute of limitation is suspended for the spouse that files for an innocent spouse relief request until the earlier of the date that the waiver is filed, or until the 90-day period for petitioning tax court has passed. If the taxpayer filing innocent spouse relief files a timely petition, the CSED is suspended until the decision is final, plus 60 days after the finalization.
If you happen to be on active duty, the CSED period is generally suspended from the time your service begins, plus an additional two hundred seventy days after the service.
WAIVER TO EXTEND THE CSED
You may elect to sign a waiver provided by the IRS to extend your CSED at which time there can be an extension of up to five years.
IRS Statute of Limitations FAQs
For the IRS to begin collection proceedings, tax must be assessed first, and the date of assessment begins the statute of limitations for collection purposes. Therefore, whether you owe money to the IRS or the IRS owes money to you, both sides have time limits to collect whatever amount of money was determined. These deadlines, called statutes of limitation, are firm; however, they can also differ depending on the situation..
Can the IRS come after you after 10 years?
Like most IRS rules, the statute of limitations can be complex and hard to decipher because the date of tax assessment is when the clock starts ticking; however, frequently disputes on that timing often surface between tax debtors and the IRS. In addition, the tax clock can temporarily be stopped for a number of reasons including filings that pertain to bankruptcy, IRS lawsuits, appeals, and tax repayment plans, among others.
Does the IRS forgive tax debt after 10 years?
Under certain circumstances, the IRS will forgive tax debt after 10 years; however that 10 year period may be longer than you expect, given lengthy suspensions, the IRS’s date of tax assessment versus your last return, and whether or not you have been keeping up to date with your tax returns since the debt period began. In a nutshell, the collection statute expiration date (CSED) is frequently disputed between tax debtors and the IRS which makes it difficult sometimes to determine when the debt is officially expunged.
What if I owe the IRS and can’t pay?
The efforts taken by the IRS to collect their taxes due can be aggressive, and the worst case scenario is for you to simply do nothing. If you work with a tax relief professional, he can help in a number of ways such as he can negotiate a potential reduction in the total tax debt, or he can establish with the IRS an installment payment plan that is financially feasible and that takes advantage of the CSED. Another option is to have the tax relief professional present a hardship case. During that process, you can request that the IRS stop collection procedures ranging from liens on property to garnishment of wages.
How do I settle myself with the IRS?
If you are not going to pay your whole tax bill at the time of filing, you should immediately get in touch with the IRS to figure out a plan. The IRS basically has 10 years to collect their payment, penalties, and interest which is a very long time. It is possible to pay less than you actually owe, and the IRS considers an offer in compromise (OIC) a last resort if you cannot pay what is due in taxes. Additionally, there are installment plan options and a temporary payment delay that you may qualify for.
How can a tax lawyer help me with the statute of limitations?
Because tax law is complex, it can be a daunting task contacting the IRS, especially if you are worried that nothing you do will make the situation better. Here is where hiring an experienced attorney can help. You get to work with a professional who has an in-depth understanding of the tax process and what options are available to you. A tax attorney is a professional focused on tax liabilities resolution, and he can help you deal with tax disputes and guide you to the best solution for your tax problem. Even the IRS’s statute of limitation has various nuances to be considered and in order to take advantage of the best options for your circumstance a tax lawyer who is on your side can assist you best.
CONTACT OUR TAX ATTORNEYS FOR MORE INFORMATION
It is certainly not hard to see that the IRS statute of limitations can be filled with many nuances which depend on individual circumstances. Repayment options are numerous and can be worked to your advantage; therefore speaking to a tax lawyer before making any decisions is your best bet to finding a solution that works the very best for you. We at Dallo Law Group have an abundance of experience to help you through this process. Our staff consists of both tax attorneys and CPAs who have worked closely with all the IRS and state agencies for many years. We have assisted numerous taxpayers with a resolution strategy suited for their unique cases. Give us a call to discuss your options and repayment strategies: 619-795-8000.