How Long Does the IRS Have to Collect From You?

Yes, tax problems can go away on their own, but you may have to wait 10 years and during that 10 years the IRS can make your life a living hell. So I’m not advocating just sitting on your hands and doing nothing. 

Yet it is important to know the time limit in which the IRS can collect from you, and it’s called the statute of limitations. After ten years, they cannot by law collect the tax. It’s important because what action you take now should depend on how long the IRS has to collect the tax from you. For example, I may decide it’s best for my client to get him or her declared currently uncollectible and try to “run out the clock” on the IRS. Or I may decide a partial pay strategy and run out the clock. Every case is different.

When Does the 10 Year Period Begin?

The IRS 10 year window to collect starts with what is called an “assessment.” This means it’s when the IRS originally determines that you owe taxes. This can occur when you file your tax return, or when the result of an IRS audit becomes final.

The IRS assesses tax, penalties, and interest by recording your tax liability on Form 23-C (Assessment Certificate). An IRS Assessment Officer triggers the assessment by signing the Form 23-C, and the date it’s signed is the date the collection statute of limitations begins.

To verify the amount and date of the assessment, we obtain a transcript of our clients’ accounts for that tax years. We also obtain Form 4340 (Certificate of Assessments and Payments) because this form shows whether an audit was conducted and an assessment made, and the date of the assessment.

WARNING: Don’t Make this Mistake!

One vital fact to keep in mind is that you can unknowingly give the IRS more time to collect by filing of an offer in compromise, innocent spouse request, collection due process appeal or bankruptcy. All of these things give the IRS more than 10 years to collect.  Each of these acts extends the 10 years during the time they are pending. If you submit an offer in compromise, and it takes the IRS 14 months to investigate it, and ultimately reject your offer, the IRS will add 14 months to the collection period.

By the way, this is why you need a professional who knows what they’re doing. I’ve had cases where we make the decision not to file certain actions because we don’t want to extend the statute of limitations. For example, I may intentionally blow the filing deadline to file a request for a due process appeal and instead pursue another kind of appeal that will not extend the collection deadline.

Tax Liens are Not Forever

IRS tax liens become legally unenforceable when the ten-year collection period expires. Think of a tax lien like a carton of milk. There is in fact on the face of the tax lien an expiration date, and once that date occurs, the IRS is SOL and they will no longer have on your house or any other property.

After the ten-year statute of limitations expires, the IRS will make an internal adjustment to their books and credit your account for the amount of unpaid taxes, interest and penalties. It’s always wise to obtain your IRS account transcripts because the transcripts will contain a line entry that “Time Frame To Collect Expired” showing zero balance.

If you need more information on tax cures, visit the Library on this website.

If you need more help with determining your tax liability statute of limitations, or if you need any help solving a tax problem, we are ready to get the job done!  Call me at 800 659 0525 for free 24 hours a day.