The reason the statute of limitations has such a big impact is because it is used to determine the likelihood the taxing authority has of being able to collect the entire tax debt. In the case of the IRS, if the full 10 years remains to collect the tax debt, the IRS may be less willing to accept an Offer In Compromise or a payment plan that ...
That even includes the tax debt statute of limitations. There’s always exceptions to the rule, even with tax debt. Typically, the IRS has ten years to collect bad tax debt accrued by a taxpayer or business. A full decade is plenty of opportunity for an IRS agent to get a wage garnishment, bank levy, or tax lien on your paycheck, bank account ...
The IRS Statute of Limitations on Collection. A statute of limitations (SOL) is a federal or state law that limits the period allowed to file legal proceedings. In other words, the statutes are deadlines, defined by law. With regards to the collection of Federal taxes, this refers to the IRS statute of limitations on collection.
As a general rule, the IRS cannot collect back taxes forever—they have a maximum of 10 years to collect back taxes from a taxpayer. There is a 10-year statute of limitations on any tax debt, so after that time, the IRS must stop the collections process. Does this mean that you are off the hook? No.
As already hinted at, the statute of limitations on IRS debt is 10 years. This means that under normal circumstances the IRS can no longer pursue collections action against you if 10 years have passed since the clock started on your tax debt. A fairly lengthy list of actions can occur that will allow the IRS to extend that 10 year period, however.
As the Consumer Financial Protection Bureau explains on its site, “a statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a debt.” These periods vary according to state laws and your type of debt, the CFPB notes. If you’re sued for a debt and the debt is too old, you may have grounds for defense.
The IRS statute of limitations on collections -- also known as the collections state expiration date (CSED for short) -- determines the window of time in which the IRS can collect. Simply put, the expiration date for the IRS's ability to collect is ten years from the initial tax assessment. Make a note of the words initial tax...
The statute of limitations for tax debt begins on the date the IRS assesses the debt, not the date it accepted your tax return. In most cases, the IRS has three years from the date you submit your return to conduct an audit. If you omitted more than 25 percent of your income, this time limit increases to six years.
The CSED -- Collection Statute Expiration Date -- gives the IRS only 10 years to collect debt relating to back income and payroll taxes. If criminal activity or fraud is alleged, the 10 year statute of limitations does not apply. The IRS writes off tax debt that is not collected before the CSED.
Currently not collectible puts the IRS at bay, and allows you to live your life without IRS intrusions into your bank accounts, wages and property. When combined with the expiration of the statute of limitations on collection, it is a legitimate method of resolution for your IRS tax debt.