How The IRS Deal With 10 Years Estatuts Limitation For Tax Debts

FAS CPA & Consultants

The IRS has ten years to collect from taxpayers, while the statute of limitations, starting on the assessment date, counts down.  

  • Before the IRS can collect taxes from you, it must either assess or take court action to collect the tax without assessment before the statute of limitations expires.
  • Starting on the assessment date, the IRS has ten years to levy or commence court action to collect outstanding taxes from you.
  • Specific procedures bind the IRS. For example, they must send you a notice of deficiency to assess a deficiency.
    • You can ask a Tax Court to redetermine the claimed deficiency within 90 days after the IRS mailed it. If you do, the IRS cannot assess the tax until a court has redetermined the outstanding amount.
    • If you fail to file for a redetermination by the court within 90 days, the IRS can assess the notified amount.

You can appeal the decision of the Tax Court ¾  BUT ¾ then the IRS can assess the tax without waiting for the court’s final decision.  

You can only stop the IRS from immediately assessing the tax by filing a bond to stay the assessment and collection. Any Assessment made by the IRS in contravention of such a stay is null and void.

As a general rule, the IRS must approach the courts or assess the outstanding taxes within three years:

  • After you file your return.
  • After the extended due date of the return.
  • Even if the taxpayer agrees to the deficiency, the IRS can no longer assess it after the expiry of the statute of limitations
  • Legislation suspends the statute of limitations when the IRS is legally prohibited from collecting and for periods agreed to by the taxpayer.
  • The statute of limitations can be suspended and extended:
    • by agreement.
    • by filing an offer in compromise.
    • by filing a bankruptcy petition.
    • by filing a collection due process appeal.
    • by leaving the US for more than six months.
    • by proposing an installment agreement and waiting for the IRS to consider it.

Taxpayers can access most of the information relating to an assessment and the subsequent statute of limitation from a transcript of their account or by filing Form 4506-T.

  • The transcript contains the account history.
  • Taxpayers can only obtain an actual assessment record by requesting it under the Freedom of Information Act [FOIA].

Defend yourself against IRS Collections

  • Are you sure that the collection statute of limitation is not expired? Unfortunately, the IRS is often wrong on this.
  • Can you make out a case that the collection is causing hardship? Then, request a Taxpayer Assistance Order.
  • Determine whether an injunction precluding collection is available.
  • Enter into an installment agreement
  • File a petition for bankruptcy
  • Is innocent spouse relief available to you?
  • Make an offer in compromise.
  • Request an audit reconsideration or a new audit.
  • Was the tax accurately assessed?

For most taxpayers, a tax deficiency or even an envelope from the IRS feels like a death notice. Call a tax professional to advocate for you when the IRS calls, and they will provide financial and tax solutions to relieve your pain.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intended for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.

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