How long does IRS have to collect back taxes?

How long does IRS have to collect back taxes?

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The IRS has a 10 year period of time in which to collect back taxes. After that ten year period of time, the back taxes drop off the tax data base and the debt is legally forgiven and can never be collected. The federal tax liens are also released by statute.

The IRS Statute of Limitations
The IRS’ collection statute of limitations refers to the maximum time period the IRS can seek to legally collect back taxes from the taxpayer. The ten year period of time begins when you file a tax return and the tax return legally posts to the IRS computer. This is usually 6 weeks after your tax return is filed. Example, if your tax return was filed April 15, 2010 and it posted on the IRS data base on June 1, 2010, the statute of limitation period would be June 1, 2020.  So it is possible to have back taxes forgiven.

IRS Statutes may be extended

Certain events, like federal  bankruptcy, can extend the time the Internal Revenue Service has to collect your back taxes. When you file a federal  bankruptcy, it stops the running of the statute period.The clock starts ticking once again after the adjudication of the bankruptcy is over plus 6 months.

Other reasons for statute extensions:

  • leaving the country for a period of time- the period is extended to the length of time out of the country
  • filing for an offer in compromise- for the duration of the consideration period
  • collection due process hearings- the time the case was in due process status
  • military deferment- time away
  • signing of a collection waiver- signing of form 900 or 2750 till the date acknowledged on the form

It is very vital to consider the effect your actions will have on the statute periods before taking any of the above actions, especially bankruptcy. Any tax debt not included in the bankruptcy will remain, and the IRS can and will resume enforced collection action once you come out of bankruptcy. In this way many taxpayers are shocked to have levy notices and bank garnishments on old  tax balances they were sure the period of time expired. Usually, taxes must be three years or older, filed for 2 years, and assessed for 240 days may be discharged.

Common misconception

The back tax expiration date is ten years from the date of assessment, commonly called the TC 150 or the CSED Date. Most common misconception is that the statue expires 10 tax years later. Remember, IRS must begins the running of the statute by the process date of your tax return on their computer.

Substitute for Return

If IRS filed your tax return under 6020b of the IRC and did a substitute for return(SFR), the same ten year statute applies.

Beware of the the Statute period

If the statute expiration date is coming near, the IRS will become much more aggressive in its attempts to collect the back tax liability. Besides the obvious result of  enforced collection action may occur such as bank levies and wage garnishments.IRS may times will want a 900 waiver signed to extend the statute of limitations. Be very careful not to sign any document within one year of the statute.

Reduce the federal tax lien to a judgment

One other caution, if IRS feels they have collection potential, they may decide to file a suit for judgment which will extend the statute for a given period of time. This varies from State to State. Many times, it is up to 20 years.

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  • This is information that answers very common questions; taxes affect everyone. I had been told that if the IRS files the return, there is no statute of limitations. But your statement (that the same 10 year statute of limitations applies) makes more sense. I think you are right.

  • John Pollard

    The statutory period can be extended by a filing of bankruptcy. For instance – you file a timely tax return for the tax year 2004 – (due 15 April 2015) while you are in the middle of a bankruptcy. If the taxes are not discharged during your bankruptcy the statue does not begin to “toll” or start until you are out of your bankruptcy. Given the example above – if your bankruptcy ends in 2009 the IRS has 10 years plus 6 months from the date your bankruptcy is dishcharged to collect the taxes due on your 2004 tax return. If you never file a tax return for a given year the IRS has forever to collect the taxes. If you need a copy of your tax payment record you can request one from the IRS.

  • mark

    The IRS filed FOR ME for the year 96…. in 2005 they filed a tax lien in court, i recently got a tax return check ? Its been 18 yrs.. am i safe from that debt ? I never keep much money in bank or stocks for fear of it being taken ? any help would be great

    • John Pollard

      You , or your agent can request from the IRS the status of the tax year – specifically the date after which the IRS can no longer collect the tax. If you don’t want to do this yourself , hire an accountant or an attorney or an IRS enrolled agent.

  • Carol

    We owe for two old tax years. About 30000 total. We lost a son and my husband lost his job. then when the housing market went to heck my contract for my job wasn’t renewed. My husband has since become disabled and dosent have an income. We made 100 dollar per month payments but the debt just keeps going up. Then the IRS cancelled our installment agreement saying we weren’t paying enough. Is there any way we can get a break on what we owe due to serious hardship. We are trying to sell our house and cant afford the IRS taking most of the equity we would get. We need to get the liens removed. And if they take the full amount this would leave us in a position where we wouldn’t have enough down payment couldn’t qualify to get into a smaller house.

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