Every tax assessment has a collection statute (CSED) expiration date. Section 6502 of the Internal Revenue Code states that the length of the collection period after the assessment of a tax liability is 10 years. The expiration of the collection law ends the government's right to request the collection of liability. In a nutshell, the statute of limitations for federal tax debt is 10 years from the date of assessment of the taxes.
This means that the IRS must forgive the tax debt after 10 years. However, there are a few things to consider. In general, the IRS has 10 years after the evaluation date to collect back taxes and tax-related fees, although there are some exceptions. This 10-year limit is known as the Revenue Act Expiration Date (CSED) and frees tens of thousands of Americans from their tax liabilities each year.
If you continue to be unable to pay your tax debt, your tax debt may remain in this state until the law is exhausted and your debt is forgiven. While there is a statute of limitations for federal tax debt, states are not required to provide the same type of relief. When your tax debt is currently in a non-collectible state, the IRS will review your situation annually and, if your circumstances do not change, your debt will remain in this state until the statute of limitations expires, at which point the IRS will cancel the remaining balance. Obviously, those who can pay their taxes must pay, and the IRS is well prepared to encourage them to do so.
Whether you work with a professional or choose to handle your tax debt on your own, be sure to respond quickly to your letter or notice from the IRS to minimize interest and additional penalties. The tax settlement date is the date you'll find on the document that serves as a Notice of Deficiency and is the date on which the IRS agent who discovered your debt for the first time filed the appropriate form. Whenever the IRS cannot currently collect any payments from you, and whenever you contact the IRS and wait for them to deliberate on your offer of a payment plan, or OIC, the 10-year period for paying your tax debt is interrupted. False or fraudulent filing or tax evasion involves deliberately presenting false tax information, failing to file or attempting to evade taxes.
Under IRS policy, such extensions should not last more than 3 months after the date on which the installment agreement would pay the tax in full and, in no case, more than 5 years, and the collection period may only be extended once per tax period. Acting quickly to pay your tax debt will give you the clean slate you need to achieve your long-term financial goals. Most people assume that once they owe money to the IRS, they must pay it back until the debt is fully resolved, no matter how much time has passed since the debt originated. The statute of limitations is an affirmative defense that the taxpayer must present, so it would not be wise to rely solely on the hope that the IRS will magnanimously contact us to share the happy news that its client's tax debts are no longer legally enforceable.
The statute of limitations is an important consideration in determining the best way to resolve the problems of any customer with unmanageable tax debts. Other examples include the period of time during which the IRS considers installment agreements, transaction offers, and innocent spouse relief. If the IRS wants an extension of the law because the anticipated term of an installment agreement would extend it beyond the CSED, it must “ask the taxpayer to sign a Form 900 tax collection exemption”. .
