How long tax debt lasts depends on your IRS payment plan and the 10-year Collection Statute Expiration Date (CSED). In either case, the longer it takes you to pay off your federal taxes, the more you will end up owing the IRS.
We will review how CSED works and how long it takes to pay off tax debt for each type of IRS tax relief, from installment agreements to Offer in Compromise.
Will the IRS Forgive Tax Debt After 10 Years?
In some cases, the IRS does forgive a tax debt 10 years after the date you received a notice about owing the IRS back taxes. This is your CSED. However, there is also the real possibility that the IRS will not forgive your tax debt, no matter how many years have passed.
The IRS can also pause the 10-year tax debt clock. Scenarios in which the IRS pauses the statute of limitations for people who owe back taxes include:
- Filing a lawsuit for or appealing an IRS tax decision
- Filing bankruptcy
- Being out of the U.S. for at least six months
- Applying for an Offer in Compromise
- Military deferment
- Signing a waiver to extend the CSED
Of course, the best way to take care of back taxes is to apply for one of several IRS tax relief plans that help taxpayers pay off a tax debt in full.
How Long Does It Take to Pay Off an IRS Streamlined Installment Agreement?
If you owe less than $50,000 to the IRS, applying for a Streamlined Installment Agreement may be a good option. With an IRS Streamlined Agreement, you must pay the total amount of your tax debt within six years (72 months) or before your CSED date.
Your federal tax returns must also be current. If you have unfiled tax returns, you cannot apply for a Streamlined Installment Agreement.
How Long Does It Take to Pay Off an IRS Guaranteed Installment Agreement?
A Guaranteed Installment Agreement allows you to make monthly payments on a tax debt that you must pay in full within three years (36 months). However, only taxpayers who owe less than $10,000 to the IRS will qualify.
The IRS will confirm that you have filed all tax returns for the past five years. If you have missing returns within this timeframe, the IRS will not approve a Guaranteed Installment Agreement application.
How Long Does It Take to Pay Off an IRS Partial Payment Installment Agreement?
Taxpayers who owe more than $10,000 and cannot pay a tax debt in full may qualify for a Partial Payment Installment Agreement (PPIA). People dealing with financial hardship due to unemployment, medical bills, or other unexpected expenses can use a PPIA to pay off IRS tax debt.
The longest amount of time permitted to make monthly payments with an IRS Partial Payment Agreement is six years (72 months). Staying current on payments and filing federal tax returns stops interest charges and penalties from being added to the total amount owed.
Keep in mind that the IRS will review your PPIA status every two years to determine whether your financial situation still qualifies as a hardship.
How Long Does It Take to Pay Off an Offer In Compromise Lump Sum Cash Offer?
For a taxpayer who qualifies for an Offer in Compromise Lump Sum Cash Offer, they must send an initial payment that is 20% of the offer amount. For example, if you owe $20,000 in back taxes and submit a Lump Sum Cash Offer of $10,000 to the IRS, you must pay the IRS $2,000 when you apply for this payment plan.
If the IRS accepts your Lump Sum Offer, they will mail you an acceptance letter. Then, your remaining tax debt must be paid in full in five or fewer monthly payments.
How Long Does It Take to Pay Off an Offer in Compromise Periodic Payment Offer?
Just like with a Lump Sum Offer, you must pay 20% of your offer amount for a Periodic Payment Offer up front. While waiting for the IRS to review your offer, you must keep making monthly payments on the remaining balance of your tax debt.
If the IRS accepts your Offer in Compromise Periodic Payment Offer, you will continue paying monthly installments until your debt is paid in full. Note that you have up to two years (24 months) to settle your tax debt with a Periodic Offer.
Will You Pay More When You Take Longer to Pay Off a Tax Debt?
Yes. As mentioned in the introduction, all past due taxes are subject to IRS interest rates, as well as possible late fees and/or penalties depending on your specific tax debt situation. These additional charges continue to accrue until you pay off your full back taxes amount and have zero balance with the IRS.
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