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 benefit of the IRS to make this law widely known.
A company deducts its bad debts, in whole or in part, from gross revenues by calculating its taxable income. For more information on methods for claiming a company's bad debts, see Publication 535, Business Expenses. Simply put, the statute of limitations for federal tax debt is 10 years from the date of the tax assessment. This means that the IRS must forgive the tax debt after 10 years.
However, there are a few things to keep in mind. You have been audited by the Internal Revenue Service (IRS) and it has been determined that you owe money to the government. So, you may be thinking that you are now in trouble for good. However, that's not exactly the case.
Although the IRS doesn't share it widely, every IRS audit tax debt has an expiration date of the collection statute (CSED). Generally speaking, the IRS has 10 years to collect an unpaid tax debt, after which the debt is eliminated. 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. Generally speaking, the Internal Revenue Service has a maximum of ten years to collect unpaid taxes.
After that time has elapsed, the obligation is completely erased and removed from the taxpayer's account. This is considered “amortization”. The ten-year period is recognized as the limitation period in tax balances or the expiration date of the collection statute, commonly referred to as CSED. Taxpayers cannot easily identify this limitation because it is 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 assess any additional taxes that could result in an IRS liability. They don't make the ten-year limit comprehensible to taxpayers for fear that a taxpayer will simply wait for time to pass. If you're choosing to delay collection and “wait until the deadline”, then you'll want to be prepared for the Internal Revenue Service's collection tactics to become severe.
When the time for your CSED approaches, the Internal Revenue Service will adopt more aggressive measures. Aggressive actions may include filing tax liens or issuing a tax lien on your bank accounts or your salaries. The quickest tactic to prevent collections from being made is to accept payment plans established by the Internal Revenue Service, also known as an installment agreement. Before you decide 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 in providing tax relief.
As a general rule, there is a ten-year statute of limitations for IRS collections. This means that the IRS can try to collect your unpaid taxes for up to ten years from the date they were evaluated. With 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.
Throughout the collection process, the IRS will insist that you can suspend taxes or withdraw a tax by contacting them and starting a payment plan, or negotiating a commitment offer (OIC) if you can't pay your debt within a reasonable time and have the means to prove it. The last of the two is usually achieved by submitting agreements to the IRS to the tax debtor, such as installment agreements, which require the extension of the CSED. The two most powerful weapons available to the IRS to force the payment of tax debts that exceed a certain limit are the federal tax tax and, finally, taxes on your accounts, salaries and certain assets. If your statute of limitations period is coming to an end and you still owe a significant amount of money to the IRS, IRS staff can offer you an installment agreement with attractive terms so that you agree to extend the collection period.
Attempting to wait for an imminent CSED to pass as a tax debt strategy should only be considered with the careful advice and guidance of authorized tax relief teams. In the case of tax debts with the IRS, it's generally not reasonable to assume that you can simply let go of your CSED. It is highly recommended that you contact tax professionals who have experience in helping people negotiate tax relief with the IRS, as they can better advise you on when your CSED is likely to receive their history and if you should contact the IRS, given your current circumstances and position, or if you can wait for it to end. A debt loses its value when the facts and circumstances surrounding it indicate that there is no reasonable expectation that the debt will be repaid.
The date of the tax assessment is the date you will find on the document that serves as your Notice of Deficiency and is the date on which the IRS agent who first discovered your debt filed the appropriate form. In addition, if you tried to hide your income or filed a fraudulent tax return, the statute of limitations does not apply to the attempt to collect a balance due by the IRS. In short, every time the IRS can't request your payments from you, it stops counting down the time limit for your debt. If you have had a tax debt with the IRS for many years due to unfortunate circumstances, an expensive accident, or financial problems during the early years of the recession, you may be considering a possible due date for your debt, as long as you have kept (and continue to maintain) meticulous monitoring of your communications with the IRS and don't have the means to pay them at this time.
If you've been struggling with tax debt for a significant period of time and you think you may be coming to the end of your collection period, it's in your best interest to contact a tax professional and reasonably explore your options. If you didn't file a tax return, the IRS can create a replacement return for you and make a deficiency assessment, starting the ten-year period. .