A statute of limitations is a law that specifies the maximum time after an event that a person can take legal action or be punished for a crime. This period is set so that evidence, witness accounts, and other aspects of the incident do not become outdated.
With that said, there is a statute of limitations for IRS collections, but it is important to note that certain conditions and circumstances can alter the terms of this regulation. To make sure you understand how this affects your tax situation, you should speak with an expert on the matter.
Timeline of IRS Collection of Due Balance
The IRS has a ten-year window in which they can try and collect unpaid taxes from individuals. After this period has passed, the IRS is no longer legally allowed to pursue any unpaid taxes. This rule was put in place by the 1998 IRS Reform and Restructuring Act. Although this rule offers some relief to taxpayers, there are still certain exceptions that should be noted.
The IRS’ ten-year window to collect taxes due starts from the date the return was filed or April 15th, whichever is later. Late filings will not reduce the IRS’s statute of limitations, and attempting to evade the IRS will not relieve you from tax liability. Consequently, filing your taxes on time is important to avoid any penalties.
The IRS’ limit for collecting money owed in back taxes can be extended in certain circumstances. This includes if you submit an amended return, have a substitute return filed by the IRS, and make a return to correct it, hide income, or file a fraudulent return. Additionally, the time period can be extended if you go through bankruptcy, request a Collection Due Process hearing, apply for an Offer in Compromise, spend an extended period outside the US, request a Taxpayer Assistance Order, or are involved in litigation proceedings with the IRS.
The IRS usually does not take legal action against taxpayers unless the amount of money owed is very large. If the time the IRS has to collect the debt is close to running out, they can sue the taxpayer in court. Doing this will give them more time to try to collect the debt.
The Collection Statute Expiration Date
The Collection Statute Expiration Date (CSED) is a time limit set by the Internal Revenue Service (IRS) that outlines the time they must collect a tax debt. This time limit is set by section 6502(a) of the Restructuring and Reform Act of 1998 (RRA 98). Generally, the IRS has a ten-year window to collect a liability, but the statute of limitations may be extended due to certain circumstances. These events are dependent on the actions of the taxpayer. After the CSED is reached, the IRS no longer has the authority to collect the debt.
The IRS will usually not take legal action against taxpayers unless the amount of money owed is very large. If the time the IRS has to collect the debt is close to running out, they can sue the taxpayer in court to extend the time limit. Generally, the IRS has a ten-year window to collect a liability, but the statute of limitations may be extended due to certain circumstances. After the CSED is reached, the IRS no longer has the authority to collect the debt.
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