If you owe taxes, you might be wondering whether there’s a limit to how long the IRS can collect. In most cases, there’s a ten-year limit called a “statute of limitations.” But waiting for the clock to run out probably isn’t a good strategy when it comes to handling your tax debt. Not only will you be assessed penalties and fees, but the chances are that if you have assets, ten years will be more than enough time for the IRS to lay claim to them.
(Learn more by reading What Can a Creditor Take?)
How to Determine the Collection Period
In most cases, the IRS has ten years from the date the agency “assessed” the tax to collect. An “assessment” occurs when the IRS determines how much tax you owe. The IRS assesses taxes either on the date the return was due, or filed, whichever is later.
Because the IRS has a deadline of three years to make a tax assessment, if you don’t file, the IRS will eventually file a “substitute” return for you. The IRS will use your past income information to determine the amount of tax you owe for a particular year, and, because the IRS doesn’t use deductions (and might use income figures from a year in which your income was higher), you can count on the tax being overestimated. Once the substitute return gets filed, the collection clock starts running.
Statute of Limitations Exceptions
The statute of limitations can change depending on certain circumstances that “toll” or temporarily stop the statute. Here are a few examples:
- filing for bankruptcy
- filing a petition in tax court
- offering to settle your tax debt through an “offer in compromise”
- traveling outside the United States, and
- filing a false or fraudulent return.
Once the event comes to an end (if applicable), the statute of limitations will begin running again.
If you file “willfully” fail to file a return, the statute of limitations on collection might disappear entirely. The IRS determines whether you “willfully” failed to file a return based on some of the following facts:
- your age, health, and occupation
- whether you attempted to hide income or assets
- whether you failed to cooperate with IRS agents
- whether you have a history of trying to evade payment, and
- your personal experience in tax matters (people in certain professions, such CPAs, tax attorneys, and law professors, are held to a higher standard).
How Do I Get a Copy of My Tax Record?
The easiest way to learn whether the IRS has made an assessment is to view your tax accounts online. You can find out how to retrieve your tax records by visiting the IRS “View Your Tax Account Information” page.
Questions for Your Attorney
- What is an offer in compromise?
- I just found out the IRS is going to audit me. What do I need to do?
- What options do I have to get caught up on back taxes?