A report from the US Government Accountability Office (GAO) reveals 30 million people end up owing the federal government for unpaid taxes each year. Although the consequences of unpaid taxes may not be immediate, the IRS typically will not forget about them. They can come after you years after you have all but forgotten about your tax debts. Here is everything you need to know about the statute of limitations and how long the IRS can chase after you.
What Is the IRS Collections Statute of Limitations?
As a general rule, there is an established ten-year statute of limitations for the IRS to collect unpaid tax debts. Essentially, the IRS is mandated to collect your unpaid taxes within the ten-year window from the date the taxes were assessed. Once the ten-year period lapses, the IRS must stop its collection efforts.
What Is the Start Date for the Limitation Period?
The start date for the limitation period begins on the date of the tax assessment by an IRS official. Typically, when you are filing your tax return and don’t pay your taxes in full, you will receive a notice indicating the tax amount you owe. This written notice bears the date that is the official start of the ten-year limitations period.
What Is the “Expiration” Date Called?
The tax debt’s forgiveness date is called the Collection Statute Expiration Date (CSED), and it refers to the legal duration the IRS must obtain unpaid tax debts. As mentioned earlier, the CSED in the United States is ten years from the IRS tax assessment date. However, there are some situations when the CSED can be extended. These situations include:
- Asking for innocent spouse relief
- Requesting a collection due process hearing
- Filing for bankruptcy
- Living outside the US for six months or longer
- Applying for an Offer in Compromise
Are There Exceptions to the CSED Deadline That Allow the IRS to Continue to Collect Past the Expiration Date?
The CSED deadline can be suspended for one or more periods. The periods when the statute of limitations is under suspension don’t count towards the ten-year deadline for expiration. As such, the IRS can continue to collect past the expiration date. The CSED deadline can be suspended during the following situations:
- If you apply for bankruptcy and the court issues an automatic stay that prevents IRS from collecting the unpaid tax. In such a case, the suspension will only last for the period of the bankruptcy case plus an additional six months.
- When the IRS is assessing your request for an Offer in Compromise, installment agreement, or innocent spouse relief.
- When you are outside the country for at least six months. As soon as you step back into the country, the clock starts ticking again.
- The IRS can also extend the CSED deadline through a lawsuit in federal court.
What Are My Options If I Can’t Pay off My Full Tax Debt?
The IRS offers several Fresh Start Tax Relief Program options for taxpayers with financial hardships who file their taxes but can’t pay their full tax debt. These options include:
- Offer in Compromise (OIC): Settle your tax debt for less than the amount you owe.
- Hardship: Request “Currently Not Collectible” (CNC) status until you’re able to make tax payments.
- IRS Payment Plans/Installment Agreements: Pay your tax debt in smaller monthly payments over an extended time frame.
How Can Wiztax Help?
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