IRS Statute of Limitations – Do Taxes Ever Expire?

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Many Americans believe that an IRS debt is a lifetime debt and that the tax collector can track them down to the grave. Fortunately, this is not the case! There are statutory time limits limiting the ability of the IRS to review and collect taxes. Taxes expire at some point and in many cases, the IRS does not get the money it was legally authorized to collect.

Basically, the IRS has 10 years from the date of dispatch of its first invoice to collect the tax. The federal tax collector must obtain the money before the time runs out. The 10-year rule does not apply to state taxes since each establishes its own statutes.

For tax assessments made after November 5, 1990, the IRS cannot collect tax after 10 years from the date of the tax assessment in the absence of special circumstances. If you never file a tax return, there is no limitation period on the IRS requiring you to file, but as a general rule, the IRS generally requires that non-filers deposit the last 6-7 years. If the IRS files for you by making a Substitute for Return (SFR), they are 10 years old from the date they file the SFR to request it. If a federal tax lien (FTL) is brought against you, it expires and becomes void if the underlying law expires. You can find out when the law expires on a tax bill by requesting a register of accounts (ROA) from the IRS for each tax year you owe.

The 10-year rule is not fixed in all situations because there are exceptions based on special circumstances which can extend the status. These are:

1. A bankruptcy in which the tax is not fully paid. Filing for bankruptcy extends the status at the time the bankruptcy is pending plus 6 months.

2. Aid order for innocent spouses and taxpayers. These extend status because they prevent the IRS Collection Division from taking coercive action.

3. Call for regular collection procedure. The ability to file an appeal due to the recovery procedure (CDP) is a powerful right in the fight against IRS direct debits or foreclosures. If filed in a timely manner, it extends the law as it also prevents its application.

4. Voluntary waivers. The execution of a voluntary waiver by a taxpayer to extend the status is rare these days because the IRS does not prosecute them often. Formerly, before the Taxpayer II Bill of Rights, this was common. The IRS no longer applies old exemptions from this point on and new ones are limited to 5 years.

5. Follows to reduce a tax obligation on judgment. The IRS can take action to extend the law by judgment through the Department of Justice. It is also quite rare.

6. Offer of compromise. An offer is a settlement proposal and once submitted, if the IRS considers the offer, it extends the status during its review. In case of approval and settlement of the tax, the FTL IRS are released and the tax assessment adjusted accordingly. However, if it is rejected (and more than 60% are rejected), this gives the IRS more time to collect.

The law on refunds is 3 years from the due date to collect your refund. If you file 3 years or more after the due date, the refund is lost. In some cases, it is possible to request a refund beyond three years. If you pay the tax, you can file a refund request within 2 years of payment. If your claim relates to a bad debt or a worthless guarantee, you have 7 years to make a claim.

The flip side of the 3-year repayment rule is that the IRS only has 3 years to review a statement filed by audit in most cases. Now the tax code is complicated and there are exceptions to these rules. If you have committed tax evasion or tax evasion, there is no status for the audit. There is also a 6-year rule for auditing in the event of a "substantial omission" of 25% or more of income. But for most people, the three-year status will apply to audits.

If you have a serious IRS debt, get serious help from a CPA, E.A. or a lawyer who focuses on these issues. Do not hire sleepwear in late night television commercials or on the radio.


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