The IRS generally has ten (10) years to collect a tax debt. After that time has passed, the IRS can no longer legally collect the debt. The ten year period begins from the date that the tax was assessed, not when it was originally due. So, if you filed your tax return late the 10 year period does not begin running until you filed the return. The date that your tax debt expires is known as the Collection Statute Expiration Date.
The best method to determine when the tax was assessed is to obtain an Account Transcript from the IRS. The account transcript provides a history of your taxes including the date the tax was assessed.
IRS tax debts can only legally be collected for 10 years, but there are many events that may suspend that 10 year period from running. This is known as “tolling the statute of limitations”. Events that suspend or “toll” the statute of limitations from running include:
• Filing an Offer in Compromise – extends the collection statute for the time the offer is pending until it is closed, including appeals, plus thirty days.
• Filing Collection Due Process Hearing — extends the statute for the time in appeals plus 30 days. The extension begins the day the IRS receives the request and continues until the taxpayer withdraws it or Appeal’s determination becomes final.
• Filing Bankruptcy — extends the period for collection by the time in bankruptcy plus six months.
• Filing a Lawsuit Against the IRS – if the taxpayer petitions the U.S. Tax Court, the statute is suspended until the court’s decision becomes final, including any appeal to the Court of Appeals.
• Pending Installment Agreements – suspends the collection statute while a proposed installment agreement relating to that liability is pending with the IRS, for 30 days following the rejection of a proposed installment agreement, and for 30 days following the termination of an installment agreement. If the taxpayer files an appeal with the Appeals Office within the 30 days following the rejection or termination of an installment agreement, the statute of limitations for collection is suspended while the rejection or termination is being considered by Appeals.
Although there are some other things that suspend the IRS statute of limitations from running, the above items are by far the most common. In general, during any time period in which the IRS is legally unable to pursue you for collection of the debt, the statute of limitations is not running.
If you exercised any of these options in the past, there was probably a period of time that the statute of limitations was not running. This has the effect of extending the statute of limitations beyond ten years – thereby giving the IRS additional time to collect unpaid taxes from you.
The IRS is not required to notify you once the collection period for a back tax debt has expired. However, they are not legally allowed to pursue collection of the debt. If you have an old tax debt and it has been awhile since you have received an IRS notice, it is very possible that the tax debt has expired and your IRS tax problems are already resolved.