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Like every good thing, there are exceptions to rules. So the same applies with the IRS Statute of Limitations.
Generally, the IRS statue of limitation runs 10 years from the original date of assessment.
What is the date of assessment? It is the day or date the IRS actually processes your tax return on there IRS computer system. It is known on IRS tax transcripts as the TC 150 date. You can pull a IRS tax transcript to find out your statue date.
What all this means is that the IRS has ten years to collect any and all money from the taxpayer during those 10 years. If the IRS fails to do so the IRS tax debt becomes legally unenforceable. It is gone, finished, never to be seen again.
So lets look at the common exceptions of the ten rule rule and what tolls or extends the statute of limitation.
The most common reasons:
1. Bankruptcy ( Any Chapter)
The collection statute of limitations, in a case under the Bankruptcy Code, is suspended while the Service is prohibited by reason of the case from collecting, and for 6 months thereafter.
2. Judgment/Litigation
The statute of limitations for collection is found in IRC 6502. When a suit to reduce the tax liability to judgment is in the government’s interest, it must be filed prior to the statute’s expiration. The filing of a suit to reduce the tax liability to judgment will suspend the collection statute during litigation.
3. Collection Due Process (CDP) Appeal
The statute is suspended from the date the IRS receives a timely filed request for a CDP hearing to the date the taxpayer withdraws their request for a CDP hearing or the date the determination from Appeals becomes final, including any court appeals. If 90 days is not remaining on the statute of limitations when the determination becomes final, the statute of limitations is extended to equal 90 days. The collection statute is not extended for equivalency hearings.
4.Offer In Compromise ( OIC ) there are so many rules regarding this statute it is best to call a tax professional. generally it tolls for the time it is in OIC status.
5. Installment Agreements With Form 900 Waiver
Form 900 Waiver will only be executed in connection with granting a partial payment installment agreement and only in certain situations.IRS Policy dictates Form 900 Waiver is limited to no more than five years, plus up to one year to account for changes in the agreement.Relief From Joint And Several Liability On Joint Returns/Innocent Spouse
6.Taxpayer Living Outside the U.S.
The period of limitations on collection after assessment is suspended while the taxpayer is outside the United States if the absence is for a continuous period of at least six months per IRC 6503(c). To make certain that the Government has an opportunity to collect the tax after the taxpayer’s return, the period does not expire (where the taxpayer has been out of the country for six months or more) until six months after the taxpayer’s return to the country.
These are the top six most common reason. Consult a tax professional to find out more.
