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 the 10-year Statute of Limitations. It is not in the financial benefit of the IRS to make this statute 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, considering extended suspensions, the date of the IRS tax settlement compared to that of your last return, and whether you've been up to date with your tax returns since the debt period began. 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.
Subject to some important exceptions, after ten years, the IRS has to stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe money to the IRS. Generally speaking, the Internal Revenue Service has a maximum of ten years to collect unpaid taxes. Once that time has elapsed, the obligation is completely erased and withdrawn from the taxpayer's account.
This is considered an “amortization”. The ten-year period is recognized as a statute of limitations on tax balances or an expiration date of the collection law, commonly known as CSED. Taxpayers can't easily identify this limitation because it's not in the IRS's best interest to cancel a liability. Your ten-year term begins when you file your tax returns and owe taxes.
The IRS has three years from the date you file a tax return to assess any additional taxes that could result in IRS liability. They don't make the ten-year limit understandable to taxpayers out of fear that the taxpayer will just wait for time to pass. If you're choosing to delay collection and “wait for the deadline,” you'll want to be prepared for the Internal Revenue Service's collection tactics to escalate. When the time for your CSED approaches, the Internal Revenue Service will act more aggressively.
Aggressive actions may include filing tax liens or issuing a tax on your bank accounts or salaries. The quickest tactic to prevent collections from occurring is to accept payment plans established by the Internal Revenue Service, also known as an installment agreement. Before deciding to take matters into your own hands with the Internal Revenue Service, you should consult tax professionals who are experts in negotiating with the IRS regarding tax liability and granting tax relief. If the IRS determines that you cannot pay any of your tax debts due to financial difficulties, the IRS may temporarily delay collection by stating that your account is not collectible until your financial situation improves.
As long as the IRS is unable to collect any payments from you at this time, and whenever you are in contact with the IRS and wait for him to give you his offer of a payment plan (OIC), the 10-year term of your tax debt will be suspended. The IRS cannot pursue it forever, and because of the IRS Reform and Restructuring Act of 1998, taxpayers are somewhat relieved by the IRS collections division's quest to pay the balance owed by the IRS. If your statute of limitations is coming to an end and you still owe a substantial amount of money to the IRS, IRS staff can offer you an installment payment agreement with attractive terms so that you agree to extend the collection period. You can call the IRS at 800-829-1040 (see phone support for business hours) to discuss any IRS bill.
Once a levy arises, the IRS generally cannot release it until the tax, penalty, interest, and filing fees are paid in full or until the IRS can no longer legally collect the tax. Once this 10-year period or statute of limitations has elapsed, the IRS can no longer attempt to collect the balance due from the IRS. For information on the IRS's efforts to facilitate law enforcement due to COVID-19, see The IRS facilitates compliance efforts during the coronavirus pandemic. .
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