Four Details to Know about the IRS Collection Time Frame

By Top Tax Staff | Jun 15, 2016 7:30:00 AM | IRS Collections

    

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When you owe the IRS a large sum of money, you may fear that you will never outlive the debt. You may foresee a future of payments that extend well into your middle age or retirement. Before you despair of being clear of your back taxes, you should understand these four important aspects about the IRS collection time frame.

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The IRS Can Collect for 10 Years

The IRS can only collect on your debt for 10 years starting from the date that you file your tax return or you receive a bill stating what you owe in back taxes. This decade time limit should be a proverbial light at the end of the tunnel for you. However, that light can be kept at a distance if certain circumstances are applied to your case.

The IRS Can Prolong the Collection Time Frame

The IRS can restart the 10-year collection process if:

  • You apply for bankruptcy and have an automatic stay against your debt issued by the court
  • You make and are rejected for an Offer in Compromise
  • You request innocent spouse relief
  • Live outside the U.S. continuously for at least six months
  • Your account is put in Currently Not Collectible status
  • The IRS sues you in federal court
  • You voluntarily extend the 10-year statute of limitation
The collection process also starts over from the date that the IRS approves any payment arrangements that you wish to make for your debt. If the IRS spends six months considering your payment arrangement offer, it adds six months to the time frame for which it can collect your back taxes.

The IRS Must Stop Collection after 10 Years

After the 10-year limit has passed, the IRS must stop its collection activity against you. When you reach the end of that collection time period, you have the right to request written transcripts showing proving that the debt is considered settled. Your account must show a zero balance for that particular debt.

The IRS must also credit your account any back taxes that you owe during the corresponding tax year. It likewise must release any liens that is has against your house, bank accounts, wages, and other assets.

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You Have the Right to Professional Tax Counsel

Going up against the IRS can be confusing and frustrating. You may not understand the laws or your rights as they apply to your case.

If you are not sure of how to proceed, you have the right to seek out professional tax counsel. A tax firm can help you decide matters like whether or not to prolong the 10-year window or allow the statute of limitations to expire on their own.

A tax firm can also help you check out resolutions to your debt like:

  • Making an Offer in Compromise
  • Requesting that your account be put in Currently Not Collectible, or CNC, status
  • Setting up a payment arrangement with the IRS
  • Paying the account in full using a credit or debit card or your checking account

Tax professionals can also find out how much longer you must legally pay on your debt by accessing the IRS's database. This information can be useful in case you have not kept track of prior payments or if you want to know whether or not to pay off the remainder or make an offer to settle it for a lesser amount.

The amount of money that you owe the IRS may seem overwhelming and frightening. You may think that you can never escape having to make payments on the debt. You can look forward to your future by realizing the limitations that apply to the IRS and its collection on your back taxes.

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