Tax Statute of Limitations

Tax Statutes

While many taxpayers believe that tax debts will last for their entire lives, there are statutes that place limits on the time in which the Internal Revenue Service (IRS) can collect delinquent taxes. As a result of these limits, which are commonly referred to as statutes of limitation, all tax debts expire at some point, making it illegal for the IRS to continue to attempt to collect those debts.

IRS Statute of Limitations for Tax Debts

The basic statute of limitations for collecting federal tax debts is ten (10) years from the date that the IRS first sends out a bill in order to collect the taxes. This rule applies to all tax assessments made after November 5, 1990 . As a result of this statute of limitations, any federal tax lien that has been placed on your property as a result of an unpaid federal tax debt also expires when the debt expires pursuant to the statute of limitations.

There are, however, special circumstances that might extend the statute of limitations for collecting a federal tax debt. For instance, if the statute of limitations expires while there is a pending bankruptcy action, a pending offer in compromise, or if you have signed a waiver that permits the IRS to continue to collect the tax debt beyond the statute of limitations, then there may be grounds for the IRS to validly continue collection of the debt beyond the ten (10) year period. Likewise, if the IRS sues you in court in order to reduce your tax debt to a judgment within the ten (10) year period, then the IRS may be able to collect on the judgment for a period of time longer than the standard ten (10) years.

Tax Return Statute of Limitations

  • Filing Federal Tax Returns - There is no statute of limitations on the requirement that you file a federal tax return. However, as a practical matter, the IRS is unlikely to require you to file more than the last six to seven years of unfiled tax returns. Plus, if you fail to file a tax return and the IRS files one for you, it has ten years from the date of its filing in which to collect the tax debt that you owe.
  • Claiming a Federal Tax Refund - If you are entitled to a federal Tax Refund, you have three years from the due date of your tax return within which to collect your refund. Therefore, if you file your federal tax refund four years after it is due, you cannot collect your refund, even if your return entitles you to a refund. However, there are some exceptions to this rule, such as if your refund claim is the result of a bad debt.
  • Collecting State Tax Debts - While there are clear statutes of limitation on collecting federal tax debts, these statutes do not apply to state tax debts. Each state‚Äôs law governs the timeframes in which the state tax agency can collect state tax debts. In some states, there are no statutes of limitation on collecting state tax debts, so theoretically, you might be liable for tax debts in certain states indefinitely.

Tax Attorney Help for Debt Statutes of Limitation

If the IRS or a state tax agency is attempting to collect a tax debt that you owe, and you believe that the debt may be invalid due to the statute limitations, you should contact an attorney for legal advice about your situation.

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