Will IRS still take Debt After 10 Years? What Can Extend Limitation Period?
Will IRS still Take Debt After 10 Years? When people hear about the IRS statute of limitations on collections, they care to know if IRS will still collect debts after 10 years. In this post, we’ll answer that question and a lot more as we take a deep dive into the rules governing the statute of limitations placed on the IRS when they are trying to collect back taxes.
Will IRS still Collect Debt After 10 Years?
When you owe money to the IRS, are you forever in debt? Fortunately, the answer is “no. Generally, there is a ten-year statute of limitations on IRS collections. This means that the IRS can attempt to collect your unpaid taxes for up to ten years from the date they were assessed.
Subject to some important exceptions, once the ten years are up, the IRS has to stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe the IRS money. If your Collection Statute Expiration Date (CSED) is near, the IRS may act aggressively to get you to pay as much as possible before the deadline or agree to extend it.
When Does the Limitations Period Begin?
The ten-year limitations period begins to run on the date of the tax assessment. This is the date an IRS official signs an application form at an IRS Service Center. For example, if you do not pay in full when you file your tax return, you will receive written notice of the amount you owe, a bill. The date on this bill starts the ten year limitations period.
If you did not file a tax return, the IRS can create a substitute return for you and make a deficiency assessment, which starts the ten year period. Thus, not filing a return and hiding for ten years accomplishes nothing.
What Can Extend The Limitation Period?
There are certain actions that can be taken by you, or by the IRS, that will extend the 10-year time frame that they have to collect the debt within. It is important that you know what these actions are. In the case of actions that you take, this will allow you to fully understand the pros and cons when deciding whether or not to take them. In the case of actions by the IRS, this will allow you to understand the full ramification of those actions.
Applying For an Installment Agreement
When you apply for an installment agreement, the time the IRS has to collect your debt will be extended by the length of time that it takes for them to review your request. This is also true if you appeal a rejection for an installment agreement. If you are rejected and do not appeal, the suspension will still continue for 30 days after you are notified of the rejection.
Applying For an Offer in Compromise
Applying for an offer in compromise behaves exactly like applying for an installment agreement. The limitation will be suspended during the time they are reviewing your application, the time they are reviewing an appeal, and for 30 days after you are notified of a rejection.
Applying For Innocent Spouse Relief
If you filed jointly and can prove that the mistake was made by your spouse and that you had nothing to do with it, you can petition the IRS for innocent spouse relief. The 10-year limitation will be suspended starting when the request is applied for. It will continue to be suspended until a court petition is filed or the 90-day window to file a petition expires, plus 60 days.
Filing for Bankruptcy
If you file for bankruptcy then debt collectors are legally barred from attempting to collect a debt from you. Because of this, the statute of limitations is suspended during the time in which collections are barred. The suspension continues for six months after that restriction has been lifted.
Living Outside Of the United States
If you leave the country for a period of 6 months or more, then the IRS has at least 6 months after you return to attempt to collect the debt. This is true even if the statute of limitations would have otherwise expired while you were out of the country.