Houston, TX: The IRS 10 Year Collection Statute - Why It Is Important

Education & Training with Rachel Kennerly, CPA

In my practice serving tax clients in Houston, TX and Lufkin, TX  representing them before the Internal Revenue Service we often tell our clients about the 10 year collection statute and how it affects our strategy. 


So what is the 10 year collection statute?  Once the IRS has assessed you with a tax liability they have 10 years to collect your tax debt.  In most cases, after that 10 years has expired so has your IRS tax debt.


Now there are actions that can be taken on a client's part that will freeze the statue and prevent it from running.  Actions like filing an Offer-In-Compromise, a CDP (Collection Due Process) request, installment agreement, and bankruptcy prevent the IRS from taking collection action and therefore toll the statute. The reasoning behind this freeze is that it's "unfair" to allow the statute to run while the government is prevented from taking collection action.


So why does the time left on the statute matter?  If a liability is recent and most of the 10 years remains, it might make more sense to file an Offer-In-Compromise for the client so they won't have a huge tax liability hanging over their heads for nearly a decade.  But if the tax debt is older and nearing the end of 10 years, having the liability deemed CNC (currently not collectible) might be the better course of action.  CNC status could allow you to keep the IRS Collection Division at bay while the last sands of time drain out of the IRS's hourglass.


How much time remains on your income tax debt?  What tax strategy might be best for you?  Do you live in Houston or Lufkin, TX?  Contact us today at 903-631-0317 or rachel@kennerlycpa.com to schedule a free phone consultation.


Rachel Kennerly, CPA, MBA
Rachel Kennerly, LLC
Lufkin, TX

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