January 8, 2016

Denver Tax Attorney   How Far Back Can the IRS Collect Back Taxes?Do you owe money to the IRS? Do you ever wish they would just leave you alone? The good news is that in most cases, the IRS debt collection process ends eventually.

As a general rule, the Internal Revenue Service has a statute of limitations on collecting taxes. The IRS has a total of 10 years to attempt to collect back taxes from a taxpayer. After this period of time, commonly referred to as the CSED or Collection Statute Expiration Date, back taxes are dropped off the tax database. This means that legally speaking, the debt is considered forgiven after this time period and can no longer be collected. Any tax liens filed will also expire at this time and will be deemed legally unenforceable.

The ten-year period begins as soon as action is taken to create the debt, or once a tax return is filed and the tax return is assessed and posted to the IRS database—typically six weeks after a tax return is filed. Remember that the statute date does not refer to the tax year, but the date of tax assessment or the date that an IRS official signs the appropriate form at the IRS Service Center. To find out when a tax was assessed against you, you may request a transcript of your tax history from the IRS.

Running out the collection statute expiration date is a strategy considered by many individuals. Of course, this scheme must be cautiously implemented as certain actions can extend the timeframe unintentionally, and the collection period may last more than ten years due to certain conditions.

Federal bankruptcy, for instance, may extend the time that the IRS has to collect a taxpayer’s back taxes. This is because a federal bankruptcy stops the running of the statute period, and only restarts it after a decision on the bankruptcy is made plus six months after your bankruptcy is no longer in effect. It is only after this time passes that the IRS may continue its collection efforts.

Other possible reasons for statute extensions include filing for an offer in compromise, innocent spouse request, military deferment, collection due process hearings, and leaving the country for a period of time. These actions and events all extend the 10 years throughout the time that they are pending, this giving the IRS more time to collect from you.

Apart from these exceptions, however, the IRS must stop its collection efforts once the ten-year period is up. Note that as your statute expiration date nears, the IRS will likely become more hostile or aggressive in its attempts to collect as much as they possibly can before the deadline or even get you to agree to extend this deadline. If the IRS asks you to extend the collection period, seek professional advice as soon as possible.

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