What is the IRS Statute of Limitations on Tax Debt?

When you’re facing down serious a serious tax bill, you’ve probably spent some time thinking about just how, exactly, you’ll pay it. It’s pretty much inevitable. That’s one of the reasons tax debt—or any debt, really—can bring so much stress and anxiety into your life. You can’t help but think about it. How will you pay your tax bill? Will you lose your home or suffer a wage garnishment? How long is the IRS statute of limitations on tax debt?

Today, we think it’s time to cover that last question. Because while it has a pretty straightforward answer, we’ve learned over the years that a lot of people take that answer the wrong way. And that leads to further tax headaches and financial problems down the line.

As with some things relating to the IRS and taxes, the short answer often isn’t enough. And as a full-service tax representation firm, we believe in the value of information to understanding the tax relief process.

So we’re going to give you the basic timeline on IRS tax debt collection and explain where people go wrong with that info. Then, we’ll cover a few smarter steps to setting yourself back on the plan to a healthy financial future.

How Long Is the IRS Statute of Limitations?

First, we’ll start with the simple, straightforward, easy answer. And then we implore you to keep reading for greater context.

The IRS has 10 years to collect tax debt. Now, let’s talk about what that really means for you.

Because many people read into that number quite a bit more than they should. The IRS tax code allows the IRS to collect on a tax debt for up to 10 years from the date a tax return is due or the date it is filed, whichever comes later. That 10 year timeframe is referred to as the IRS Statute of Limitations, or SOL, on collections.

The clock starts either based on when you filed or when your return was due, depending which one comes later. A couple of examples to illustrate:

So if you filed your return for 2018 on March 1st of 2019, the IRS Statute of Limitations on collections wouldn’t actually kick in until April 15th of 2019. Meaning the expiration date would fall on April 15th of 2029.

On the other hand, if you’ve fallen behind on tax return filing and end up filing your 2019 tax return on March 1st of 2023, the 10 year SOL will last until March 1st of 2033.

You Can’t Run Down the Clock

At first thought, you might think you can outrun the IRS for a while. But think on that idea long and hard, and you’ll realize it’s not much more than a pipe dream. The IRS has a way of getting its hands on the money its owed, and it has a number of ways of finding you.

Any time you start a new job, you’ll file tax paperwork—and the IRS will locate you. And the longer you attempt to avoid them, the more avenues they will pursue to collect. They can place a tax lien on your home or other property. They may garnish your wages, severely reducing your income and putting a bind on your budget. And the closer you get to the Collection Statute Expiration Date, or CSED, the more aggressive the IRS may get in collections.

What if you never file your tax returns?

Some people operate under the misconception that never filing their taxes will somehow protect them from the IRS’s gaze, and ultimately, collections. However, the IRS has a number of ways of estimating your tax bill, regardless of whether or not you file your tax return. And when they assess your estimated tax bill, they’ll send you a notice in the mail—and that starts the 10 year period, as well.

In fact, a number of other actions that you can take that might start or reset the statute, including filing an amended tax return. But only a few actions you can take will pause or stop the timeline for good.

Simply put, you can’t run down the clock.

How to Stop the IRS Statute of Limitations

So, you want to stop the collections timeline in its track? The best way to stop the IRS statute of limitations is to take some action to make good faith efforts to repay your debt. But is that really a bad thing?

Two of the most common tax solutions for repaying your tax debt include repayment plans and the offer-in-compromise. In the former, you lay out a plan for repaying your tax debt in installments. With an offer-in-compromise, you may be able to strike a deal with the IRS to reduce the tax total you owe. When you file for either of these options, the clock on your statute of limitations will stop temporarily.

There are several other actions that might temporarily pause the clock:

  • Filing appeals
  • Filing lawsuits against the IRS
  • Extended leave from the country
  • Filing certain waivers
  • Filing for bankruptcy
  • Various deferments

However, your goal shouldn’t be to pause the clock, because eventually it will start right back up again. Your long-term goal should be to eliminate your tax debt.

Enlisting the Right Help

Let’s get real for a second. After ten years of running from the IRS, your financial life may well never recover. Between levies, garnishments, and the emotional stress of your growing mountain of tax debt—there won’t be much relief waiting for you once the IRS statute of limitations expires. You need a plan.

And you shouldn’t wait until you receive your first IRS assessment or miss a tax payment to start making that plan! Start early by enlisting a tax team to help you out. Tax debt can be overwhelming enough! But wading through the IRS’s website brings its own challenges. (No offense to the IRS! But that site can be a challenge to navigate).

A professional tax representation firm will help you understand your tax debt, determine what you should file, and find all the deductions and credits you may have otherwise missed out on! For example, it’s not uncommon to discover the IRS actually overestimated what you owe. Whatever your situation is, put it into the hands of professionals. Experts you can trust.

Eliminating the IRS Statute of Limitations—for Good

As the saying goes, “The only way out is through.” The IRS Statute of Limitations isn’t limitless, but dodging the IRS’s collections efforts for 10 years is rarely worth it. Instead, build a bridge to your financial future and help get yourself back on track. It may not seem like it, but paying off your tax debt is the best feeling in the world.

Trust us.

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