Can the IRS chase you forever? The answer is complicated, but no, you may not have to fear the IRS for the rest of your life if you’ve been carrying around tax debt for a while. Let’s discuss something called the Expiration of Statutes.
The IRS’s term for when the clock runs out on your debt is the Collection Statute Expiration Date, or CSED. Many taxpayers are surprised to discover that tax debt can expire. This is important information to know if you believe that the collection statute expiration date is approaching on debt that you owe. Here is why the start date of your tax debt may help to determine what your next step should be.
What Is the IRS’s Definition of the Expiration of Statutes?
The IRS defines the Expiration of Statutes as the automatic expiration of your debt after a certain period of time. Your tax debt is expunged by default if you pass this date without paying in full. That means that the IRS can no longer pursue your debt or punish you with penalties.
Important Things to Understand About CSED
CSED can be complicated. You shouldn’t try to outrun the IRS just because most tax debt can and does expire, but it’s important to know when your debt will potentially expire.
The big thing to know is that the CSED can be extended by certain actions. In fact, applying for relief of any kind may extend the expiration date of your debt. Litigation and suits to reduce judgment can also freeze the clock on debt expiration. Here are some circumstances that may extend the lifespan of a tax debt beyond the default expiration date:
- When you move out of the United States for at least six months
- When you file for bankruptcy
- When you file for innocent spouse relief
- When you request a Collection Due Process (CDP) hearing
- When you apply for an Offer in Compromise (OIC)
You’re going to want to take a look at the records if you’ve taken any kind of action to contest your debt or seek relief as a taxpayer. There may be a good chance that your debt’s lifespan was extended if you’ve applied for any type of relief program in the past. Of course, that doesn’t mean that your debt won’t expire. We’re simply looking at a longer window.
The good news is that your debt cannot be reestablished once it has expired. The IRS loses its ability to collect a remaining balance once the date hits. Of course, that doesn’t mean that the IRS won’t try to collect anything it’s owed before your CSED arrives. There is a lot that the IRS can do before your debt expires to try to collect as much as possible. This can include liens, levy enforcement, and property seizures.
Ask yourself just how much you are willing to risk in order to “wait out” the IRS. Don’t forget that measures taken by the IRS can have long-term effects on your finances. Your credit profile could suffer for years if the IRS moves forward with collection efforts due to back taxes. This could impact everything from employment opportunities to your ability to purchase property. The bottom line is that the repercussions of having long-standing debt with the IRS could outlast your actual debt by many years.
Another important thing to know about the IRS Expiration of Statues is that the IRS is not going to notify you when your debt expires. You will likely notice that collections calls come to a halt once you reach the statute of limitations on your debt. However, it will be up to you to request documentation from the IRS that shows that your debt has expired. It is important to have this written proof, because you may be asked about your tax debt when you go to obtain loans or financing from financial institutions and lenders in the future. In addition, you will need documentation that clears you as a debtor if you need to have a federal tax lien removed.
How Long Can the IRS Collect From You?
The IRS typically has 10 years to collect a debt starting from the date of assessment. The IRS’s right to pursue that debt ends after 10 years – but bear in mind the factors that can extend an expiration date, as discussed above.
Why You Need Professional Tax Help Regarding IRS Expiration of Statutes
Should you attempt to wait out your impending CSED? This is not a simple strategy. It is essential that you only consider this option when utilizing the careful guidance and advice of a team of licensed, experienced tax professionals. You may discover that relief options are available that can get you on the right side of the IRS before your debt deadline is up. These moves could provide debt relief, freedom from harsh penalties, and the ability to spare your credit records.
It’s important to know what an impending CSED can mean for your debt. The first step is to get an accurate assessment of exactly when your debt will truly expire. This information can help you to build a plan of action for walking away with the best possible outcome for your financial future. The team at the Tax Group Center can offer guidance and support regarding the IRS Expiration of Statutes. Let us help you figure out exactly where you stand with the IRS!