IRS Statute of Limitiations: Can they really run out of time to collect?


IRS Statute of Limitations

The taxman doesn’t have forever to chase down unpaid taxes. Generally, 10 years after the tax is assessed, if the IRS hasn’t collected, the IRS statute of limitations kicks in and debts are forgiven. However, there are some important limitations to be aware of.


#1: The statute date refers to the date of assessment, not the tax year

For example, if a tax payer does not file their 2005 1040 until 2007, and the IRS hasn't yet to assess (via a Substitute for Return Mechanism), that means the statute does not expire until 2017.


#2: Many things will toll the statute from expiring

For example, if a tax payer files bankruptcy, the statute will not run. Or if a tax payer files an Offer in Compromise (OIC), while the OIC is being considered, that too will toll that statute of limitations. From my professional experience, I have seen instances of taxes that were due in 2000, because of actions by the tax payer, the period the IRS had to collect was technically forever.


#3: Tax payers actually agree to extend the statute

This is a huge mistake. Sweet-talking IRS employees some how actually convince tax payer to allow the IRS more time to collect taxes. If the IRS ever asks you to extend the period to collect, be sure to get some professional advice first.


#4: As the statute gets closer to expiring, the more aggressive the IRS becomes

I have seen taxpayers who got away without paying a cent for years even though they owed the IRS huge amounts. Then, the IRS only has a much more limited time to collect and unleashes a torrent of levies, garnishments and seizures. These actions cause significant pain, and an emotional drain that is humiliating.


#5. The statute does run while a tax payer is in Currently Non-Collectible status (CNC)

CNC status may be a solution to wait out the IRS, but requesting CNC status requires the taxpayer to give the IRS all their financial information (just like an OIC). This strategy could be dangerous if the taxpayer doesn't qualify for CNC.


If you have questions or need assistance, contact us to schedule a free, confidential consultation. Call us at 888-727-8796 or email info@irsmedic.com.