As a general rule, there is a ten-year statute of limitations for IRS collections. This means that the IRS can attempt 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. The debt is at least three years old.
To begin evaluating whether a taxpayer will be able to deduct back income taxes, the rule states that the tax return must have been due at least three years before filing for bankruptcy. If the IRS wants to file tax evasion charges or related charges, it must do so within six years, generally counting from the due date of the unfiled return. As with most things tax-related, it can be a little difficult to determine when the ten-year collection period for your tax debt ends. In addition, state tax agencies don't necessarily have their own Taxpayer Bill of Rights and can pursue state tax debt more aggressively than the IRS.
The federal tax lien occurs automatically when the IRS sends the first notice demanding payment of the tax debt that is imputed to you and you don't pay the amount in full. In addition, any future federal tax refunds or state income tax refunds owed to you could be garnished and applied to your federal tax liability. 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 levy and, finally, taxes on your accounts, salaries and certain assets. However, that 10-year period may be longer than expected, given the extended suspensions, the date of the IRS's tax assessment compared to that of your last return, and whether or not you have been keeping up to date with your tax returns since the debt period began.
If you've been struggling with tax debt for a significant period of time and think you may be coming to the end of your collection period, it would be in your best interest to contact a tax professional and reasonably explore your options. Acting quickly to pay off your tax debt will give you the clean slate you need to achieve your long-term financial goals. Before an offer can be considered, you must have filed all tax returns, received an invoice for at least one tax debt included in the offer, have made all the estimated tax payments required for the current year, and have made all the required federal tax deposits for the current quarter and the previous two quarters if the taxpayer is a business owner with employees. If you continue to be unable to pay your tax debt, your tax debt can remain in this state until the statute expires and your debt is forgiven.
While it is supposed to begin when the tax was originally calculated, the CSED is frequently the subject of controversy between tax debtors and the IRS. The last of the two options is usually achieved through the submission to the tax debtor of agreements, such as installment agreements, which require the extension of the CSED. Trying to find the best approach to managing tax debt can be stressful and confusing, but a TaxAudit tax professional can help you determine the best strategy for resolving it. In general, the IRS only has ten years to collect the assessed tax balance, but the agency exists to collect taxes and will use all the tools and methods at its disposal to do so, including wage garnishments, levies and levies.
If you discover that you can't pay your taxes and simply don't file the return, the IRS will use existing information (such as a previous return and informational statements from employers and businesses) to file an approximate replacement return in your name, without any of the applicable deductions it would normally use...