In our many dealings with the IRS in Colorado, the Statute of Limitations is often a key element to consider in regard to tax relief help. This affects the amount of time the IRS has to set up a payment plan, whether you would qualify for an Offer In Compromise, and even whether you owe the debt any longer. By analyzing this important event for many clients, we have seen $100s of thousands of dollars eliminated from struggling taxpayer’s debts! Many tax resolution companies have one or two pet solutions that a sales person will try to sell you. While we offer those same types of solutions, we also have a whole arsenal of tools to employ that often a salesperson at a national chain may not even understand. Knowing the Internal Revenue Service’s Statute of Limitations is one more tool in our box of solutions. We are Advanced Tax Solutions, CPA, PC, and we take fixing tax problems very seriously.
One of the reasons we have such a strong reputation is that your initial consultation is with a licensed professional, who is also a Certified Tax Resolution Specialist and who understands these complex rules. We have a great reputation in an industry that doesn’t. Many of our competitors use unlicensed and unqualified salespeople to sell you a solution. Here, you will only meet with professionals to determine what course of action is best. The meeting is provided at no charge.
How long does the IRS have to collect a tax?
The IRS Statute of Limitations is well worth understanding whether you live in Colorado or anywhere in the country. This statute only applies to taxes that have been assessed, so the first thing that must happen is that a tax return needs to be filed to start that 10-year clock ticking. If you don’t file, the IRS has no limit on how long they can go after that year.
On the flip side if you owe money to the IRS but have a refund owed to YOU for an old tax year, you only have three years to file a claim for that refund. If you don’t file for the refund within the three year period, by law you lose it. The IRS gets 10 years, and you get three. You can tell who writes the laws. But I digress.
Generally, the IRS has 10 years to collect the balance due (IRC Sec 6502). The 10 year time period doesn’t start until the IRS assesses the tax and sends a bill. Because of that, most Statutes for tax returns start on April 15
If the return is filed after that date, the 10 year period does not start until after the tax is actually assessed by the IRS. Because some events can trigger an extension of the statute of limitations (IRS calls them tolling events), it’s really important to review the information the IRS has on file to determine the actual day that the statute of limitations runs out. After that date, and as a fact of law (NOT IRS discretion), the balance simply goes away, and you do not owe the tax any longer. However, because of various legalities people can easily misunderstand exactly when their statute of limitations runs out.
What kind of events will increase the IRS Statute of Limitations?
The more common events that cause the 10 year statute to be extended are as follows:
Filing for bankruptcy extends the Statute for Collections for the entire time you are in bankruptcy. While you are in bankruptcy, the IRS cannot collect from you, so they add that time PLUS 6 months to the time they have remaining for collecting the tax.
Filing certain types of appeals (such as a collection due process appeal or an appeal with the Taxpayer’s Advocates Office) will extend the statute. During the pendency of the Appeal, the IRS stops collections. The amount of time the collections have been stopped plus 30 days get added to the IRS Statute of Limitations for collection of the tax.
Leaving the country for more than 6 months can cause time to be added to the statute of limitations.
You can sign a waiver to give them more time to collect. While this is generally not a good idea, sometimes it’s in your best interest to do so. The IRS may use the hammer of levying your wages to get you to sign the waiver. It’s almost like blackmail, they sometimes won’t release a levy until you sign a document giving them more time to collect.
This is not an exhaustive list, but it is a good starting point for the more common ways the statute can be extended.
If you have an old tax liability, you may want to find out the actual date it expires before trying to get any type of solution with the IRS. However, calling to ask them for the information may spark up aggressive collections. They will almost always ask where you work and where you bank.
We research IRS Statute of Limitation dates all the time, so let us know if we can support you with that. A little professional advice could make you feel a whole lot better about your tax problem with the IRS! Whether you live in Colorado or elsewhere, having the taxes expire due to the IRS Statute of Limitations is a great solution if the circumstances are right.
If the tax will simply go away due to the amount of time that has passed, why kick the sleeping dog? With a Power of Attorney and our certified tax relief help, we can calculate that magical date and the IRS collections will be none the wiser!
