Most of the taxpayers who come into our Richardson TX tax office believe that there are no limitations in the amount of time that the IRS has to collect tax debt. Did you know that the IRS has actually has only 10 years of time to collect tax debt from you once your tax is assessed? There are certain exceptions that may delay or toll the 10 year time limit that we’ll cover, but in general, without any actions by the taxpayer which stop the clock, once the 10 years are up, the IRS has to stop its collection efforts and the taxpayer no longer owes the government for its tax debt.
How is the 10 Year Statute calculated?
The calculation begins on the date that the tax is assessed, not the date the tax is filed. Basically, it is the date the tax return is processed in the IRS’s system. This is typically immediately if a tax return is electronically filed but can be months with paper returns. As we mentioned above, there are some actions taken by the taxpayer that can put a hold on collections and also put a hold on or toll the 10 year limit. These include filing bankruptcy, a Collection Due Process (CDP) hearing, filing an Offer In Compromise, and the time that an Installment Agreement is pending.
If there are not actions that delay the statute, the calculation is fairly easy. You would take the date that the tax was assessed (you can find that on your tax transcripts) and add 10 years. If you have had actions that have delayed collections such as mentioned above, you will need to add the appropriate number of days to the 10 years to get the government’s expiration date. The reason for the delay of the 10 year calculation is if the statute wasn’t tolled, the government would not have 10 full years to collect the tax, and it would allow the taxpayer to take certain actions to run out the clock on the government.
How does the 10 Year Collection Statute change my Tax Resolution Approach?
Before you make any decision on how to proceed with the resolution, you should understand when the Collection Statute elapses. For example, if the debt is recent, you may wish to file an Offer-In-Compromise to resolve the debt but if the debt is close to the 10 year expiration, it may make more sense to let the clock run out. It is also a good reason why a Taxpayer may not wish to file an Offer-In-Compromise that has no or a low chance of being accepted. Doing so, will waste your time and resources, while also extending the 10 year clock.
Do you Need Help?
If you need help in resolving your tax debt, we can help you. Please give me a call at (972) 821-1991 or at bob@jablonskyandassocates.com. To learn more about us, visit our website at https://jablonskyandassociates.com/.
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