The Statute of Limitations on Collections – How Long Does IRS Have to Collect the Tax ?

Westport CT

11 October, 2021

12:01 AM

Description

Many people believe that the statute of limitations, or the amount of time the IRS has to examine a tax return, is three years.  This is generally true for assessment of the tax, i.e., the amount of time that IRS has from the filing date of the tax return to look back and make adjustments to that return. However, for the taxpayer that has a past due balance, the IRS has ten years from the date of assessment to collect the tax. For example, if the tax return is filed on April 15, 2019 and any balance due is not paid, the IRS has until April 15, 2029 to collect that past due balance. Knowing the amount of time remaining on the ten year collection period is important because it helps determine which solution the taxpayer should take to resolve the past due balance.  If the taxpayer has most of the ten years remaining, then the solution may be to file an offer-in-compromise or request an installment plan.  This may make the most sense as it will stop the running of interest and penalties, as well as stop IRS enforcement activity. On the other hand, it will stop the statute of limitations from running, thereby extending the time the IRS will have to collect the tax.  However, if there is little time remaining on the ten year statute, then it may make sense to try to have the outstanding liability deemed currently non-collectible, which will allow the ten year statute to run out while simultaneously keeping the IRS from continuing enforcement action.    Understanding the options available when trying to settle tax debt with the IRS should be taken seriously and retaining professional help is recommended.  If you or someone you know has an unpaid IRS income tax liability and needs assistance in resolving it, please feel free to contact me, Steven R. Diamond, CPA,  at 203-221-2700, or at my email [email protected]. Steven R. Diamond, CPA 191 Post Road W. Westport, CT 06880