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Posted on Oct 21, 2009 in Tax Q&A | 5 comments

Length of Time IRS Debt can be Collected

There are several statues of limitations when it comes to how long the IRS has to collect tax debt from you.  The first statute of limitations you have to worry about is the time the IRS has to go back and examine (or audit) your income tax return.  The IRS has three years from when your tax is assessed to audit your return.  That means, if you filed your 2008 tax returns on time, before April 15, 2009, the IRS will assess your taxes on April 15, 2009 and they have until April 15, 2012 to audit that return.  If they do not audit your 2008 return by that time then you don’t have to worry about them coming after you for that period.

The second, and probably the most important statute of limitations to you, is how long the IRS has to collect the tax from you.  The IRS has 10 years to collect your income taxes.  If they do not collect the income taxes from you within ten years from the date your taxes are assessed, then your tax debt – no matter how much – will be forgiven.  The key to this statute of limitations, however, is when your taxes are assessed.  Your taxes are assessed shortly after your tax return is filed.  If you file before April 15 each year, your taxes will be assessed on April 15 since that is the due date.  If you file your income tax returns late, however, your date of assessment will be after you file the return.

The clock will start to run on how long the IRS has to collect that tax as soon as the tax is assessed.  So approximately 10 years after you file your income tax return your IRS tax debt will be discharged.

While this sounds great, especially if it has been 9.5 years since you filed your income tax returns that you owe for, there are some things that can lengthen your statute of limitations to give the IRS more time to collect from you:

  1. If you filed a fraudulent return.  The IRS can come after you from now until eternity if you have filed a fraudulent return.  Not only do you have to worry about owing the IRS money for your tax debt in this situation, but you may have to worry about some jail time as well.  Do not do this!
  2. Filing an Offer in Compromise, Bankruptcy, or Collection Due Process Hearing Request: Any time collections are stopped for one of these reasons the statute of limitations for collection of your income tax debt is also paused.  So if it takes 9 months for your offer in compromise to be considered and denied, then your ten years will have another 9 months added on to the end.  This is also true when you have filed for bankruptcy or for a collection due process request with the IRS.

So, to wrap up this post, I want to give you a quick tip for success with your tax problems.  Always file your income tax returns on time.  Not only will you reduce the penalties that you might rack up if you owe the IRS more than you can afford to pay, but you can also get the clock started on your collection statute of limitations.

I also want to point out that there is separate statute of limitations for collection for each tax year that you file.  That means that your statute of limitations for your 2007 return will be separate for the statute of limitations for your 2008 return.  Also, if you owe for your return and you are audited and the IRS assesses additional tax against you, that additional assessment for the same period will have a different statute expiration date – which as you know from the opening paragraph to this blog post could be up to three years later.