Expiration of Back Taxes | Statute of Limitations on IRS Collections

Expiration of Collection Statutes

Expiration of Back Taxes: Statute of Limitations on IRS Collections

This can be one of the easiest ways to eliminate back taxes. The IRS is prohibited, by law, from collecting on expired taxes liabilities beyond the Collection Statute Expiration Date (CSED). This is a wonderful tool for tax relief if you know how to use it. IRS has 10 years from the “Assessment Statute Expiration Date” (ASED) (usually close to the filing date or audit assessment date) to collect the tax liability.

Technically, if you fail to file a tax return, there is no deadline for the assessment of the tax on that tax year. In most cases, the IRS observes a six-year statute of assessment for an unfiled returns. If you fail to file and the IRS wishes to assess the taxes against you, they will file a substitute for return (SFR). Once the SFR has been assessed by issuing a Notice of Deficiency and the taxpayer fails to timely respond, the 10-year time clock begins.

The IRS aggressively pursues taxpayers who owe taxes right before their CSEDs expire. Why? After this date, the IRS cannot legally collect the tax debt. Therefore, the taxes owed essentially disappear

The IRS will NEVER inform you when the 10 years are up. They will continue to send you invoices and attempt to collect the debt. It is up to the taxpayer to prove to the IRS that the 10 year Collection Statute has expired.

As with all IRS rules, there are exceptions to the rule. There are event the will extend or toll the statute;
• If the taxpayer agrees in writing to allow the IRS more time by signing a waiver
• If the taxpayer files bankruptcy
• If the taxpayer files an offer in compromise
• If the taxpayer requests an installment agreement, the time period before the IA is approved
• If the taxpayer files an application for taxpayer assistance order (Form 911-ATAO
• If the taxpayer request for a collection due process hearing

There are more intricate events and circumstances that will extend the statute of limitations beyond the 10 years. It would be extremely difficult for the average taxpayer to do the analysis to determine the exact remaining statute of limitations, give all of the possible tolling factors.

Allow our Certified Tax Resolution Specialist to perform a Collection Statute Expiration Date (CSED) analysis. We obtain special records of your account that the IRS has on your behalf. We analyze these to record to determine the 10 year CSED has, or when it will, expire. By doing this analysis, we can determine on exactly what day you will be free of this obligation. If the expiration date is nearing, many times it is advantageous to the taxpayer to just "do nothing". It is extremely important to know when to just wait. Understand, the IRS typically tries to strong arm you at the end. This is when your need a Certified Tax Resolution Specialist to show you your options.

What Can be Done if the IRS is Pursuing an Expired Debt

If the IRS is attempting to collect a tax liability which has expired under the 10 year statue, the taxpayer must inform the IRS in writing that they no longer have the right to collect this tax liability. You can imagine, this is no easy fight
Once proven correct, the IRS MUST write off the tax liabilities and cease collections.
Once the Statute Has Expired

Generally, we can also, simultaneously obtain a certificate of Lien Release (if a Tax Lien as filed) so that your credit score has an opportunity to recover as well.
We have saved our clients literally millions of dollars, just by advising and strategizing with them to wait out the 10-year expiration date, especially if they are close. This is a wonderful tool for tax relief, if you know how to use it.

AUDIT STATUE

The IRS generally has 3 years, from the date a return is filed, to Audit that return. For example, if you file your 2010 return on Sept 17, 2011, the IRS has until September 17, 2014 to audit that return. The IRS tends to issue a lot of audit notices in the month of December, the year before the third year. If the IRS can show that you have underreported your income by greater than 25%, in a year under exam, they can go back and audit the last 6 years! If the IRS can prove fraud or criminal activity, the statute is open indefinitely.
Remember there is not statute of assessment on an unfiled return. While the IRS typically does not pursue returns older than 6 years, they can pursue older returns.

Get help from our team of experienced Certified Tax Resolution Specialists to resolve your tax debt. Call us today toll free at 800-829-7483 (800-TAX-SITE) for your FREE INITIAL CONSULTATION.