In general, the Internal Revenue Service (IRS) has 10 years to collect unpaid tax debt. After that, the debt is erased from your books and the IRS cancels it. This is called a 10-year statute of limitations. It is not in the financial benefit of the IRS to make this law widely known.
Under certain circumstances, the IRS will forgive the tax debt after 10 years. However, that 10-year period may be longer than expected, given the extended suspensions, the IRS tax assessment date compared to that of your last return, and whether or not you have been up to date with your tax returns since the debt period began. You have been audited by the Internal Revenue Service (IRS) and it has been determined that you owe money to the government. So, you may be thinking that you are now in trouble for good.
However, that's not exactly the case. Although the IRS doesn't share it widely, every IRS audit tax debt has an expiration date of the collection statute (CSED). Generally speaking, the IRS has 10 years to collect an unpaid tax debt, after which the debt is eliminated. Towards the end of the CSED, the IRS tends to be more aggressive in its collection efforts, hoping that the taxpayer will pay as much as possible before the deadline or agree to extend it.
While all taxpayers are entitled to tax debt forgiveness after 10 years, the clock can stop (or “take a toll”) temporarily. Unfortunately, when the CSED is delayed, the time during which you can collect it is extended. As a general rule, there is a ten-year statute of limitations for IRS collections. This means that the IRS can attempt to collect your unpaid taxes for up to ten years from the date they were evaluated.
With some important exceptions, after the ten years have elapsed, the IRS must stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe money to the IRS. Basically, every time the IRS can't actively pursue the collection of your tax debt, time stands still. While it is supposed to begin when the tax was originally calculated, the CSED is frequently the subject of controversy between tax debtors and the IRS.
One way to avoid this is to set the start date with the IRS immediately after notification of an outstanding tax balance. Documentation that accredits the tax debtor is needed in cases involving the removal or release of a federal tax lien, which is a necessary step to begin repairing financial and credit profiles. In the case of tax debts with the IRS, it's generally not reasonable to assume that you can simply let your CSED pass. The date of the tax assessment is the date you will find on the document that serves as the notification of deficiency and is the date on which the IRS agent who first discovered your debt filed the appropriate form.
First of all, there is no way to reduce the IRS statute of limitations period by filing your return before April 15. During that process, a tax professional can request that the IRS stop collection procedures, which range from property liens to wage garnishment. It is highly recommended that you contact tax professionals who have experience in helping people negotiate tax relief with the IRS, as they can better advise you on when your CSED is likely to receive their history and if you should contact the IRS, given your current circumstances and position, or if you can wait for it to end. Some IRS employees are not aware of the CSED; in general, the IRS may also be reluctant to disclose the date or, as mentioned above, its calculation may not be accurate.
We'll also discuss what conditions can extend your 10-year collection period and how to use the IRS statute of limitations to your advantage. This includes filing for bankruptcy, as the IRS is legally prohibited from collecting your payments during this period.