How Long Can IRS Collect Tax Debts?

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So, for how long can IRS collect tax debts? A short and simple answer is 10 years! IRS is subjected to a 10 year statute of limitations on its tax collections, limiting the time span available to recover all the debts. The statute of limitations means that IRS is legally allowed to collect all the unpaid tax debts only up to 10 years of time period from the day they were imposed. With the exception of few circumstances, once the 10 year time span is over, the IRS has to stop the tax collection. There are thousands of tax payers in the United States who know how long can IRS collect tax debts. So they breathe a sigh of relief when their statute of limitations for paying the IRS gets expired. But there's no sympathy for you before the expiration! Because IRS acts forcefully to recover as much tax debts as possible before the validity period of your 'CSED - Collection Statute Expiration Date' ends.

How does IRS track the Collection Statute Expiration Dates?

IRS encounters multiple Collection Statute Expiration Dates in a single year for numerous debt assessments done by them. It is not possible for IRS to track each and every expiration date manually, therefore they use an automated system that keeps a complete track record for every assessment done on your file. The system not only tracks the assessments but also handles the records of each account's expiration date. 

Now that you have come to know about how long can IRS collect tax debts, let's have a look at the starting time of the limitation statute.

Beginning of the statute of limitations

For how long can IRS collect tax debts? 10 years! But what is the starting time of this period? The 10 year span of the statute of limitations starts from the day your debt is evaluated by IRS, not the day IRS accepted your tax return. The limitation period begins with an application form being signed by an IRS official at any of the IRS service centers. Let's say, if you don't pay the full taxation amount while filing for your refunds, IRS will issue a written document to you, stating the money you owe, basically a bill. The ten year time span of your statute of limitations begins from the date mentioned in that written notice. Now that you know how long can IRS collect tax debts, let's look at some other details.

Mostly IRS has a time period of 3 years to conduct your audit starting from the day you filed your returns. But if you excluded more than 25% of your earnings, the audit time span will increase to 6 years. However, if you did not file for tax refunds, IRS can form an alternate return for you making a deficit assessment which will initiate the ten year time frame. Bottom line is, if you are planning to not file the tax returns and hide yourself for ten years, shove that thought right away!

Why does IRS have only 10 years of time span?

As you know for how long can IRS collect tax debts, let's look at the factor that why only 10 years? IRS is allowed to collect tax debts from taxpayers only for the time period of 10 years by the federal law. Doing this will become a hurdle in the productivity of a government agency, then why would it limit its collection? This is because it is much easier to collect tax on the current debts than older ones.  The implementation of statute of limitations compels IRS to utilize its resources on the debts it is almost certain to collect. Once the Collection Statute Expiration Date passes, the IRS has no authority to confiscate your properties and bank accounts or demand for the tax money.

The law of limitations is often mistaken with the one that administers commercial creditors like tax collection agencies. As soon as the limitation statute expires, the creditor is not allowed to sue the debtor but it can go on with other collection methods. Even if IRS chose not to seize your property, the lien imposed on your real estate will be a big hurdle in the sale or transfer of the estate. It is the duty of IRS to release all inflicted property liens as soon as the 10 year statute of limitations period gets over. If IRS still does not lift up the lien from your properties and other assets within 30 days, you must contact the IRS and appeal to get information about your property's lien status. Apart from the request, a better option will be to ask for a lien release certificate from IRS. The certificate will be a proof that the lien inflicted by IRS on your asset is now invalidated.

Want to know more on how long can IRS collect tax debts?  Go to www.freedomtaxaccounting.com or call 407-344-1012.