Is There a 10-Year Statute of Limitations on IRS Tax Debt?
Aug. 19, 2020
We routinely represent taxpayers in IRS civil tax cases located in Memphis and Jackson Tennessee, North Mississippi, and West Memphis Arkansas. The answer is a resounding yes! With that said, there are some caveats you must know.
Legally speaking, the IRS has only 10 years for which to collect a tax debt. After 10 years, the debt becomes unenforceable and the IRS can no longer try to collect. The technical term for the statute of limitations is the Collection Statute Expiration Date (CSED). The regulation can be found at 5.1.19 Collection Statute Expiration on the IRS website.
Does this mean that if your tax debt is 10 years old or older than the IRS can no longer collect the debt? Not exactly. The clock only starts to run when the tax has been assessed. This means you have to have filed the applicable tax return and the IRS has officially accessed the tax to you. For example, let us say I have an unfiled tax return from the year 2000. While the taxes are older then 10 years, the IRS can still work to collect the taxes because I did not file them. So what happens when I file those returns from the year 2000 in 2020? The clock will now start to run on the 10-year statute/CSED. The earliest the debt would be uncollectable would be in 2030 because that is 10 years from when the tax was assessed.
What happens if you did not file your taxes late and it has been 10 years? Can the IRS still collect the tax? The answer is maybe. There are a number of things you can do to toll the statute or in other words stop the 10-year clock from running. For instance, if a taxpayer submits an offer in compromise; file a collection due process request; request an installment agreement, or file for bankruptcy the statute of limitations stops while those things are in process. Submitting an offer in compromise could take up to a year or more to receive a determination from the IRS. Imagine if you submitted multiple offers in compromise applications. The taxpayer could have potentially paused the statute of limitations for several years.
You will want to reach out to a tax professional to calculate if your debt is still collectible by the IRS. This work will require pulling several years of the taxpayer's tax transcripts and calculating what the real 10-year statute of limitations date is for the taxpayer.
If you have old tax debts that might be uncollectable; have any questions about IRS tax resolution; offers in compromise; or any other IRS issue, please feel free to contact me.