How Long Can The IRS Collect Back Taxes?

When you receive a bill from the IRS, most taxpayers’ first instinct is to panic. However, there are options available that could help you avoid or at least modify the amount of time in which you’ll have to pay those taxes. We’ve put together a list of common questions and answers on this topic.

The IRS can collect a debt for up to 10 years.

To start, the statute of limitations for paying off a tax debt with the U.S. Internal Revenue Service is 10 years. This statute of limitations starts from the date you file your return. But, beware of the factors that could possibly ‘reset the clock’ on this statute of limitation. For instance, if you are later audited or a correction is made on your return, the 10 year period starts from that date. 

Don’t ignore the IRS’ collection attempts

The IRS’ collection attempts may get more aggressive over time. And if you continue to ignore the IRS, your options will become more limited.

If you ignore an IRS notice, the agency can charge you a late payment penalty. It can also begin collection actions, which could include issuing a levy or a lien on any current or future property.

Begin a discussion with the IRS and let them know that you are interested in resolving the matter. But, there are some potential ‘landmines’ in this communication process, so it is a good idea to get some expert legal advice before starting these discussions.

Requesting a “hardship status” may be an option

A large tax bill could be hard to pay immediately for many taxpayers. If you’re having trouble paying your tax debt, there is help. But first, let’s explore what a ‘hardship status’ is and how to apply for it.

A hardship status is a special exemption from paying taxes that are due if you have a very low income and can’t afford to pay them back at the time of filing. You may be eligible if:

• You have dependents who rely on your income
• You don’t qualify for an installment agreement or offer in compromise (a way to settle debts with the IRS) because you don’t have enough money available each month after all living expenses are paid; or
• Your financial condition prevents payment of some or all of your tax debt by any means other than by taking advantage of certain programs such as working off your debt under an Offer in Compromise program (OIC).

The statute of limitations can be reset

If you work out a payment plan and make payments, the statute of limitations will be extended for the period of time during which the IRS is considering or negotiating your payment plan.. 

The IRS can only collect back taxes for 10 years from the date you filed your tax return. Additionally, if you file an appeal or Offer in Compromise, the 10 year period will be extended.

If you have made all payments under a payment plan but still owe money in back taxes, then you may be able to settle with the IRS outside of court by agreeing to pay those remaining amounts. In some cases, this could help convince them not to pursue collection action against you any further than they already have (if indeed they have not yet done so).

Avoiding the IRS is never a good strategy

We can’t reiterate this enough – it is not to your advantage to ignore communications from the IRS. But it is a good strategy to know how to respond to them. 

A letter from the IRS about an outstanding tax balance does not automatically mean that you owe that amount or that they are immediately going to place liens upon your property. The IRS has certain legal restrictions on what it can and cannot do when trying to collect back taxes from someone who owes them money.

Correspondence like this from the IRS simply means that they are contacting you to find out about any problems with the filing returns but also try working out some sort of repayment plan. Sometimes there are questions about the taxes that need to be clarified.

It’s important to remember that the IRS can only collect for 10 years.

Conclusion

With all of this in mind, we hope that you’ll reach out to the IRS if you receive a bill from them. Don’t be afraid to ask for help and negotiate with them on your payment terms. If you don’t want liens placed on your property or want to avoid having the statute of limitations reset, then working out an agreement with them is the only way to do so.

Contact our offices for a FREE phone conversation to discuss the tax payment options available to you..