What Happens If You Don’t Pay Taxes for 10 Years?

Will IRS still take debt after 10 years? When people hear about the IRS statute of limitations on collections, they care to know if the IRS will still collect debts after 10 years.

Understanding the rules around tax debts and how long the Internal Revenue Service has to enforce them can be essential for managing your finances.

Read on to find out 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?

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.

What Is a Statute of Limitations? 

A statute of limitations is a law that sets a deadline for someone to start legal action or claim a legal right. 

These laws are there to protect people or organizations from being sued after a lot of time has passed, making it hard for them to defend themselves.

For example, say you were in a car accident and both you and the other driver got hurt, but insurance covered all the costs. 

Then, ten years later, the other driver decides to sue you. That might feel unfair because after so much time, it would be difficult for you to gather evidence to defend yourself. 

Witnesses might have moved away or passed away, or they might not remember the accident clearly. Also, any video footage that could help show who was at fault might no longer exist.

This principle also applies to taxes. It would be unreasonable and unfair for the IRS to expect someone to keep tax records for more than 10 years or to deal with a very old tax bill. 

That’s why there are limits on how long you can be taken to court or be asked to pay for past issues.

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 years. Thus, not filing a return and hiding for ten years accomplishes nothing.

What Can Extend The Limitation Period?

Certain actions 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.

You must know what these actions are. With actions that you take, will allow you to fully understand the pros and cons when deciding whether or not to take them.

Here are the reasons:

1. 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 time that it takes for them to review your request.

This is also true if you appeal a rejection of 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.

2. 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.

3. 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.

4. Filing for Bankruptcy 

If you file for bankruptcy, debt collectors cannot legally attempt to collect a debt from you.

Because of this, the statute of limitations is suspended during the time when collections are barred. The suspension continues for six months after that restriction has been lifted.

5. Living Outside Of the United States

If you leave the country for 6 months or more, then the IRS has at least 6 months after you return to collect the debt.

This is true even if the statute of limitations would have otherwise expired while you were out of the country.

Sometimes, the IRS statute of limitations can benefit you if you handle things correctly.

But, you need to understand the rules around tax debts and how long the IRS has to enforce them can be essential for managing your finances.