10 Jul 19 Audra Walter
We believe in second chances. Start your comeback story today.
Talking openly about federal tax debt is among the most challenging tasks. It’s up there with running into a burning building to save a loved one. We know this from experience. People are able to talk about a whole range of difficult topics much more easily than they are about IRS tax debt. We understand the challenge. That’s why we’ve gathered a whole team of qualified tax professionals who handle tax debt resolution in a non-judgment, empathic way. Contrary to whatever else you may have heard, federal tax debt is not about fiscal irresponsibility. Many honest, hardworking people slip into tax debt for legitimate reasons. For some, the complexity of the tax system makes it almost impossible for them to handle their taxes solo, and so they slip into debt. For others, keeping up with their tax obligation became too much because of other bills. Even though we know that federal tax debt isn’t about irresponsibility, it’s still hard to talk about. The professionals at Boxelder Consulting understand this better than anyone. Let us assist you on your journey back to financial health. Everything starts with that first step. Give us a call at 303-317-6111 to begin your journey.
In this post, we’ll go over some of the key things you need to know about the federal tax debt statute of limitations. As we discussed in an earlier article, the statute of limitations for IRS collections of federal income tax debt is 10 years. We’ve got that point nailed down. But, there are a few things you need to keep in mind about this statute. And those things are worth pointing out independently.
The 10 Year Time Window Only Begins After Your Debt is Assessed
Many people, upon first hearing about the tax debt statute of limitations, may think that this time limit will apply even if they don’t file their return. They think to themselves: “Alright, I’ll simply avoid filing, and then in 10 years I’ll be off the hook!” Unfortunately, the process doesn’t work that way. When you file your return and fail to pay your obligation in full, the IRS will record this deficiency and send you a written notice. The date on that written notice is the date your time clock begins. If you simply avoid filing and never receive this assessment, then your time clock won’t start. And if your clock doesn’t start, it can’t expire either. If you avoid filing, this won’t solve anything. Sometimes, the IRS will institute a substitute return for you on your behalf and then send a written notice based on that substitute return. In that situation, you may have a time clock even if you don’t file. But the key point is that you need an assessment date in order for your time window to begin.
The 10 Year Time Window Can Be Extended
Another key thing you need to know about the IRS collections time window is that it can be extended in some instances. Here’s a (non-exhaustive) list of the things which can extend the statutory time limit for IRS collections. Before looking at this list, however, a good way to understand extensions is to look at the time limit as only applying to time during which the IRS has the ability to collect the debt. If the IRS ever loses its ability to collect your debt, then the amount of time during which the IRS didn’t have the ability to collect will be added to the time limit. Here’s the list:
- Filing a bankruptcy
- Filing an offer-in-compromise
- Filing an installment agreement
- Filing an appeal
- Filing a lawsuit against the IRS
- Staying outside of the U.S. for a period greater than 6 months
- Military deferments
All of these things can add to your time clock. And the reason for this is because the IRS will not have the ability to pursue your debt in these instances.
You are Responsible for Obtaining Documentation on Your Expiration
If you happen to successfully wait out your tax debt and the statute of limitations expires, the IRS is not responsible for issuing you documentation to substantiate this fact. You will need to take the initiative and contact the IRS in order to obtain written proof of the expiration. You will want to contact the IRS and request this type of documentation. The IRS can issue a certificate which releases any tax liens on your assets. This written certificate will be necessary as you attempt to improve your credit-worthiness.
The Time Window Can Be Voluntarily Extended by You
The 10 year time clock can also be voluntarily extended if you choose to do so. Before the current laws which apply to IRS collection were in place, the IRS used to threaten people to try to compel them to “voluntarily” extend the time limit. This is no longer permitted. But, taxpayers still have the right to voluntarily extend their time limit if they should ever want to do that. Also, the time limit may be extended if taxpayers enter into an installment agreement for less than the full face amount of the debt. In such cases, taxpayers will sign a waiver of the time limit; the extension cannot last longer than 6 years, however, and so if the installment agreement doesn’t go as planned the time limit will still be there.
Reach Out to Boxelder Consulting Today!
Again, some of these things we’ve covered, but they’re easily worth mentioning again. Those who plan to wait out their IRS tax debt via the statute of limitations should be aware of these key facts. The statute of limitations time clock can be more difficult to overcome than you might think. As you expiration date approaches, the IRS may become more aggressive in its collection efforts. This is to be expected. If you have federal tax debt, it’s advised that you reach out to a professional who can help you get back on track. The tax professionals at Boxelder Consulting counsel clients on a daily basis regarding their IRS tax debt. We can assist you as you attempt to resolve your case and move forward. Contact us today at 303-317-6111 to speak to one of our specialists and begin your journey toward financial health!