Many Americans believe that an IRS debt is a debt for life and that the tax collector can hound them to the grave. Thankfully, that is not the case and there are statutory time limits on the ability of the IRS to examine and collect taxes. Taxes do expire at some point and in some cases IRS does not get the money they were legally entitled to collect.
Basically, IRS has 10 years from the date they send out their first bill to collect the tax. The 10 year rule does not apply to the states. Some, like California have no statute of limitations and the state tax collector can indeed hound you forever. The federal tax collector must get the cash before the clock runs out.
For tax assessments made after November 5, 1990, the IRS cannot collect the tax after 10 years from the date of the original assessment absent special circumstances. Special circumstances that may extend the statute are: a bankruptcy not completed or wherein the tax is not discharged; filing an Offer-in-Compromise; or signing a Form 900 Waiver allowing the United States additional time to collect the tax. Also, it is possible for the government to sue to reduce the tax claim to judgment before the 10 years expires.
If you never file a tax return, there is no statute of limitations on IRS requiring you to file, but as a matter of policy, IRS generally only requires non-filers to file the last 6-7 years. If IRS files for you by doing a Substitute-for-Return (SFR), they have 10 years from the date they file the SFR to collect from you. If a Federal Tax Lien is on file against you, it expires and becomes void if the underlying statute expires.
You can find out when the statute expires on your tax bill by requesting a Record of Accounts (ROA) from IRS for each tax year you owe. If you can't afford to pay the tax, your account might be eligible to be put in a "temporary hardship" status. It may be possible to "ride out" the statute in hardship if you qualify. An impending statute might also be a beneficial factor in an Offer-in-Compromise.
If you have a refund coming to you, you only have 3 years from the due date to collect your refund. If you file 3 or more years after the due date, the refund is lost. In some cases you can peruse a refund beyond the three years. If you full pay the tax, you can file a claim for refund within 2 years of the payment. If your claim relates to a bad debt or worthless security, you have 7 years to make a claim.
The flipside to the 3 year refund rule is that IRS only has 3 years to examine a filed return by audit in most cases. Now, the tax code is complicated and there are exceptions to these rules. If you have committed fraud or tax evasion, there is no statute for audit. There is also a 6 year rule for audit in cases of "substantial omission" of 25% or more in income. But for most folks, the three year statute will apply on audits.
Websites that can help you research these issues are: www.irs.gov, www.naea.org, www.exirsman.com, www.taxattorney.com, and www.etaxes.com. I do not recommend dealing with IRS on your own. You should get help from a tax pro if you have a tax collection or audit issue. Don't hire some company you saw on a TV commercial, hire a flesh and blood person or reputable firm. A good CPA, Enrolled Agent (EA), Accredited Tax Advisor (ATA), or Tax Attorney can be invaluable. If you want to call IRS yourself, they can be reached at 1-800-829-1040.
James Robert Coleman, E.A., A.T.A.
Enrolled Agent & Accredited Tax Advisor
Member: National Association of Enrolled Agents
Former IRS Revenue Officer, GS-11
http://www.exirsman.com
Are you in the middle of a disagreement with the... Read More
Choosing the right tax preparer for your business is a... Read More
April 15th looms in front of most people every year... Read More
OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More
Own residential rental properties? This article discusses how income from... Read More
Over 50% of marriages end in divorce in the United... Read More
The powers of Congress, and the limitations set upon those... Read More
In the rush to get tax returns prepared and filed... Read More
So, you were pleasantly surprised to learn that you are... Read More
Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More
Many taxpayers are confused about how long they should keep... Read More
Many Americans believe that an IRS debt is a debt... Read More
If you paid someone to care for a child so... Read More
Does this scene sound familiar? It's April 7. You haven't... Read More
Six Urban Myths ? Taxation"I am proud to be paying... Read More
In elementary school, kids come up with creative excuses why... Read More
Let's assume that you would like to begin saving for... Read More
As your business grows, you are going to need help.... Read More
Anyone who is closely related to an accountant knows that... Read More
"Settle for Pennies on the Dollar! IRS debts settled for... Read More
No one likes paying tax. Everyone understands that tax is... Read More
The knock on the door from a Tax Inspector is... Read More
A Federal Tax Lien (FTL) is a legal instrument that... Read More
As a small business owner, it's wise to familiarize yourself... Read More
Q: I was contacted by the city tax collector to... Read More
The IRS has obtained civil injunctions against more than 100... Read More
The means and types of businesses have transformed with advent... Read More
Someone once remarked, "Next to being shot at and missed,... Read More
While there are many equally valid reasons to incorporate, saving... Read More
Often people fall on hard times and stop paying on... Read More
It's that time again, the April 15 tax deadline is... Read More
With the massive losses caused by Katrina, the economy of... Read More
If your like many, you don't always understand what people... Read More
The federal tax code is complex. This complexity generally arises... Read More
Donating your used car to charity is a win-win situation;... Read More
Assume a buyer in Pakistan downloads software from the Internet... Read More
Import duties continue to be significant elements in the cost... Read More
Strategic planning throughout the year results in a minimal tax... Read More
The knock on the door from a Tax Inspector is... Read More
Running a home based business reaps many wonderful tax deductions... Read More
Employers often ask employees to designate the amount of tax... Read More
Should I take wages or dividends from my privately owned... Read More
As a gentleman was leaving my class recently, he wanted... Read More
Newlyweds and the recently divorced should make sure that names... Read More
Small Businesses Filing Amended Federal Tax Returns to... Read More
Estate taxes. It's not enough to simply know they exist,... Read More
As a sole proprietor, it's wise to familiarize yourself with... Read More
1812The first attempt to impose an income tax on America... Read More
OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More
IRS Tax forms can be confusing.Am I a 1099 or... Read More
The Internal Revenue Service is reporting that the difference between... Read More
In a past article I relayed the plight of the... Read More
With the massive losses caused by Katrina, the economy of... Read More
No one likes paying tax. Everyone understands that tax is... Read More
Reservists called to active duty and enlistees in the armed... Read More
At the present time a company incorporated in the Isle... Read More
Own residential rental properties? This article discusses how income from... Read More
Managing a business small, medium or big requires you to... Read More
Adding Your First Additional Stream of IncomeMost new wealth builders... Read More
Q: I was contacted by the city tax collector to... Read More
Does your incorporated business pay alternative minimum tax ["AMT]? If... Read More
Yes, the tax season is upon with the first filing... Read More
Anyone who is closely related to an accountant knows that... Read More
One can never underestimate the enthusiasm that politicians have for... Read More
Media reporting of a new EU savings tax directive has... Read More
"Settle for Pennies on the Dollar! IRS debts settled for... Read More
Tax |