In general, the Internal Revenue Service (IRS) has 10 years to collect unpaid tax debt. After that, the debt is erased from your books and the IRS cancels it. This is called a 10-year statute of limitations. It is not in the financial interest of the IRS to make this statute widely known.
Under certain circumstances, the IRS will forgive the tax debt after 10 years. However, that 10-year period may be longer than expected, given the lengthy suspensions, the IRS tax assessment date compared to your last return, and whether or not you have kept up with your tax returns since the debt period began. You have been audited by the Internal Revenue Service (IRS) and it has been determined that you owe money to the government. So, you might be thinking that you are now on the debt hook for good.
However, that's not exactly the case. Although not widely shared by the IRS, every IRS audit tax debt has a collection law expiration date (CSED). Generally speaking, the IRS has 10 years to collect an unpaid tax debt, after which the debt is canceled. Towards the end of the CSED, the IRS tends to be more aggressive in its collection efforts, hoping that the taxpayer will pay as much as possible before the deadline or agree to extend it.
As a general rule, there is a ten-year statute of limitations for IRS collections. This means that the IRS can attempt to collect outstanding taxes for up to ten years from the date they were assessed. Subject to some important exceptions, after the ten years have elapsed, the IRS must stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe money to the IRS.
Generally speaking, the Internal Revenue Service has a maximum of ten years to collect unpaid taxes. Once that time has elapsed, the obligation is completely erased and removed from the taxpayer's account. This is considered a “cancellation”. The ten-year period is recognized as a statute of limitations on fiscal balances or an expiration date of the collection statute, commonly known as CSED.
Taxpayers can't easily identify this limitation because it's not in the best interest of the IRS to cancel a liability. Your ten-year term begins when you file your tax returns and owe taxes. The IRS has three years from the date you file a tax return to evaluate any additional taxes that could result in IRS liability. They don't make the ten-year limit understandable to taxpayers for fear that the taxpayer will simply wait for time to pass.
If you're choosing to delay collection and “wait for the deadline to pass,” you'll want to be prepared for the Internal Revenue Service's collection tactics to get tough. When the time for your CSED approaches, the Internal Revenue Service will become more aggressive in its actions. Aggressive actions may include filing tax liens or issuing a tax lien on your bank accounts or salaries. The quickest tactic to prevent collections from occurring is to accept payment plans established by the Internal Revenue Service, also known as an installment agreement.
Before deciding to take any matter into your own hands with the Internal Revenue Service, you should consult tax professionals who are experts trained in negotiating with the IRS regarding tax liability and the provision of tax breaks. As long as the IRS cannot currently collect any payments from you, and as long as you contact the IRS and wait for them to deliberate on your offer of a payment plan (OIC), the 10-year period for paying your tax debt will be stopped. For an assessment of the tax debt on a tax return you filed (or on a substitute return that the IRS prepared on your behalf), this is the date the IRS recorded the amount of your taxes due and you can find it on your tax transcript. You can call the IRS at 800-829-1040 (see telephone support for hours of operation) to discuss any IRS bill.
If the IRS determines that you cannot pay any of your tax debts due to financial difficulties, the IRS may temporarily delay the collection by stating that your account is currently not collectible until your financial situation improves. Yes, in fact, the period of time that the IRS can collect a tax debt is generally limited to ten years, according to the IRS statute of limitations on collections. If your statute of limitations is coming to an end and you still owe the IRS a significant amount of money, IRS staff can offer you an installment agreement with attractive terms for you to agree to extend the collection deadline. Once a tax arises, the IRS generally cannot release it until the tax, penalty, interest and registration fees are paid in full or until the IRS can no longer legally collect the tax.
When the ten years have passed, the IRS is required to cancel the debt as a bad debt, essentially forgiving it. When your tax debt is currently in a non-collectible state, the IRS will review your situation annually and, if your circumstances do not change, your debt will remain in this state until the statute of limitations expires, at which point the IRS will cancel the remaining balance. For information on IRS efforts to facilitate law enforcement due to COVID-19, see IRS Facilitates Compliance Efforts During the Pandemic. .
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