Some say the only certain things in life are death and taxes. This might make you assume that tax debts don’t go away until they’re fully paid off. But taxes do, in fact, expire. After your tax debt’s collection status expiration date, the IRS can no longer collect on it.
How Long is the IRS Statute of Limitations?
The IRS statute of limitations is generally 10 years from the date of the assessment to collect on a tax debt. In practice, we have determined the statute of limitations for IRS collections to be closer to 12 years, due to a number of events that pause the clock on the IRS statute of limitations.
How Boxelder Can Utilize the IRS Statute of Limitations
Edward came to Boxelder Consulting with a problem that had been on his mind for years. Almost a decade prior, he had owned a small business that had failed, and over a two-year period, he had accrued about $20,000 in payroll tax debt. Since then, however, he had been filing his taxes on time and had not owed the IRS any additional money.
During their initial investigation, the licensed tax professional working with Edward recognized that the collection status expiration date (CSED) for his debt was less than six months away. In other words, the time limit on his debt was about to expire.
Knowing with confidence that the IRS would no longer be able to collect on the unpaid taxes that had been hanging over his head, Edward made several nominal voluntary payments and saved close to $20,000. Edward continues to use Boxelder Consulting for accounting help so he can stay on track.
IRS Statute of Limitations – Rules and Requirements
- The only requirement for a CSED to take effect is for 10 years to pass from the assessment or accrual of debt. However, the IRS statute of limitations will pause, or toll, in the following circumstances:
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- While the IRS considers an Offer In Compromise or Installment Agreement.
- While a Collection Due Process (CDP) hearing is pending.
- While the taxpayer resides outside the U.S.
- While the taxpayer is in the process of a bankruptcy proceeding.
Benefits of the IRS Statute of Limitations
- The existence of a drop-dead due date for tax debt can be extremely beneficial. Once the taxpayer has that set date in mind, they can envision the end of their ordeal, move forward, and make decisions about their future.
- In addition to the principal tax debt, all penalties and interests expire at the CSED.
- All tax liens expire at the CSED.
- The taxpayer may even employ a resolution strategy that incorporates the CSED, such as a partial pay installment agreement.
Drowning in long-overdue tax debt? Reach out to our team of licensed professionals at Boxelder Consulting. We can review your case and determine if the amount you owe is soon due to expire. Take action before the IRS begins taking collection actions.