Regarding the Statute of Limitations on a Tax Debt

People often question if there will come a time when after years of collecting tax debts, the IRS can no longer claim the money you owe them. They inquire of there is a statute of limitations on IRS tax debts. Yes, there is.. The law says that the IRS can only go after you in a span of 10 years. After that time, your debts are considered non-existent, and your IRS problems, solved.

The strategy of not settling your taxes and outwitting the IRS for ten years may seem simple, but it is not. Everyone who has tried running away from their tax debts will testify that the government will be incrementally rigorous in their collection methods. Apart from this, a tax lien will also be imposed on your credit record and remain there until after the statute of limitations has run its course. As a result, your credit record is lowered thus disqualifying your from any loans available to diligent tax payers. These pieces of information without a doubt, indicate the need for us to avoid a tax lien at any cost.

So as to avoid being subjected to such extreme and damaging measures, it is best that you work closely with the IRS. 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. During that proceeding, your tax debt is essentially frozen. If, unfortunately, your OIC is denied, the 10-year period resumes from the point when the decision was arrived at. In effect, another year was added to your 10-year period.

Another action that will affect the statute of limitations period is filing for bankruptcy. Because the IRS is not allowed to collect anything from you while your claim is being processed, the 10-year period is frozen and this will only resume after a resolution on your bankruptcy status is reached. Once again, the statute of limitations on your tax debt is increased.

While many people may think that the situation is bleak and none of this is good information, the fact is, this means that the IRS will not be able to chase you down forever. They may be able to 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 lessen the severity of any IRS problem. The first step is to seek out a tax professional such as a tax lawyer or accountant. After all, handling the IRS is too technical a task and you will only be able to accurately do this if you utilize the services of those who are knowledgeable in this area.