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Is there a statute of limitations on Tax Debt?

Many people contemplate on the probability of outrunning their tax debts. Will there ever come a time when the IRS is no longer allowed to collect money from you? Is there a sta...
Views: 947 Created 12/03/2008

Many people contemplate on the probability of outrunning their tax debts. Will there ever come a time when the IRS is no longer allowed to collect money from you? Is there a statute of limitations on IRS tax debt? Fortunately, the answer is affirmative. Indeed, the IRS only has a limited amount of time to collect what you owe them. There is a statute of limitations that allows the IRS to try to collect taxes for only a 10-year period. After that period has passed and the IRS was not able to collect on the debt, that tax debt will be erased, and so will your IRS problem.

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 to escapre from their tax debts will remark that the government will be incrementally rigorous in their collection methods. Besides this, a tax lien may also be placed on your credit record and will remain in effect until the 10-year period has elapsed. The tax lien in your credit score significantly lowers the latter and will keep you from getting any loan no matter what you are trying to purchase. Because of these negative effects, it is necessary that you avoid a lien at any cost.

So the best recourse is to actually work with the IRS so that they do not go to such extreme and damaging techniques. For all we know, 10 years is such a long time to wage war against the government, and the fact that certain occasions may extend the statute of limitations period makes the situation worse. For example, if you apply for an OIC, or an Offer in Compromise, the process to receive an acceptance or denial could take over a year. The statute of limitations on your tax debt is essentially frozen during that period and in the event that your submitted OIC is not approved, it will continue from the point when the decision was made, which will effectively add another year to that 10 year period.

Filing for a bankruptcy also influences the statute of limitations period. 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 decision on your bankruptcy status is reached. Once again, the statute of limitations on your tax debt is increased.

While many people may believe 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 run after you forever. Ten years may be too long at time, and indeed it is, but at least, it's 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 attorney or accountant. After all, handling the IRS is a task that should not be undertaken sans the help from those who are more well-informed in the field.

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