IRS Statute of Limitations on Collections: Expert Guide

Understanding the IRS Statute of Limitations on Collections

The Internal Revenue Service (IRS) statute of limitations on collections is a pivotal aspect of tax law that can significantly impact taxpayers who owe back taxes. Understanding this statute can help individuals manage tax liabilities effectively and take advantage of the rights afforded to them under federal law.

What is the IRS Statute of Limitations on Collections?

The statute of limitations on collections refers to the period during which the IRS can legally collect outstanding federal tax debts. This period typically spans 10 years from the date the tax was assessed. If the IRS fails to collect the debt within this timeframe, they lose the legal right to do so.

Refer to 26 U.S. Code § 6502 for specific details on the statutory period for tax collection. This section of the Internal Revenue Code provides a clear outline of the IRS's limitation period and permissible actions.

How is the Collection Period Calculated?

The collection period begins when the IRS assesses a tax liability. This means from the date they officially determine what you owe. The start date for this period is crucial as it serves as the reference point for the 10-year countdown.

Extensions to the 10-Year Period

There are circumstances that can extend the collection period beyond 10 years. These include:

• Offers in Compromise (OIC): If a taxpayer submits an OIC, the period is suspended while the IRS considers the offer.
• Bankruptcy: Filing for bankruptcy can halt IRS collection activities, thereby extending the collection statute.
• Installment Agreements: Entering into an installment agreement does not automatically extend the statute, but defaulting on an agreement might lead to additional time.

Actions to Take if You Owe Back Taxes

If you find yourself within the IRS collection period with unpaid taxes, consider these steps:

1. Review your IRS Notices: Understand the nature and the amount of your tax debt.
2. Consult a Tax Professional: Seek advice on the best course of action based on your financial situation.
3. Consider Payment Plans: Explore installment agreements or offers in compromise.
4. Monitor Your Collection Statute Expiration Date (CSED): Keep track of your CSED to be aware of when the IRS can no longer legally collect your debt.
5. Communicate with the IRS: Keep open lines of communication to clarify any misunderstandings or discrepancies in your tax accounts.

FAQs on IRS Collection Statute of Limitations

• What happens if the IRS does not collect my debt within 10 years? The tax debt becomes unenforceable, and the IRS writes off the obligation.
• Can the IRS extend the collection period? Yes, under certain situations like OIC or bankruptcy.
• What is a Collection Statute Expiration Date (CSED)? CSED marks the endpoint of the IRS’s ability to legally pursue collections.
• Does entering an installment agreement extend the collection period? Not automatically; however, some agreements may indirectly affect it.

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