About the Statute of Limitations on a Tax Debt

Many people consider the probability of escaping from their tax debts. If they just do not pay off their tax bill, will they ever reach a point where the IRS can no longer attempt to collect the money? Is there a statute of limitations on IRS tax debt? The easy response is yes. Yes, the IRS does indeed have a limited period in which they can collect the money you owe them. There is a statute of limitations that enables the IRS to attempt to collect taxes for only a 10-year period. After that period has passed and the IRS was not able to collect on the debt, that tax debt will be erased, and so will your IRS problem.

 

Although this cases seems plainly simple, that is outlasting the IRS for 10 years just by not paying them, it is not. Ask anyone who has attempted not to pay the IRS for any amount of time. They will surely comment that the government has grown better and better at using all means of tax collection. During those 10 years, the IRS will definitely use every tactic and strategy available to get their money. The IRS can also place a tax lien on your credit record that will remain there until the 10-year period has elapsed. This tax lien will definitely lower your credit score and in effect, you will not be eligible for a loan of any sort. You want to avoid a tax lien at all costs as it is a serious IRS problem.

 

The best solution then involves you working with the IRS so they will not resort to such extreme and damaging measures. While 10 years is already a very long time, certain occasions give way to the extension of this prescribed period. For instance, applying for an Offer in Compromise, or an OIC, takes about a year to be processed for approval or denial. In essence, your tax debt is essentially frozen at the time of the hearing. If, unfortunately, your OIC is denied, the 10-year period resumes from the point when the decision was made. In effect, this gives you another full year, on top of the prescribed 10-year period.

 

Filing for bankruptcy also increases your statute of limitations period. This occurs because until a decision on your bankruptcy claim is reached, the IRS cannot collect money from you and your 10-year period is frozen. In effect, your statute of limitation period is increased.

 

In spite of many people's belief that the news on statute of limitations only makes matters worse, a few are still grateful of the fact that the IRS cannot chase them down forever. They may attempt to collect debts from you for a substantially long amount of time, but at least it is not forever. Fortunately, there are things you can do to help minimize the severity of any IRS problem. The first step is to consult a tax professional such as a tax attorney or accountant. After all, handling the IRS is an endeavor that should not be undertaken sans the help from those who are more well-informed in the area.

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Originally posted 2008-09-30 17:20:16. Republished by Blog Post Promoter

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