Owing money for delinquent taxes can be a stressful situation, and one that may stick around for years. While back taxes don’t necessarily stay with you forever, the law does give the IRS at least 10 years to collect that debt.
But what happens after that? Does IRS debt go away after a period of time, or is there another step in the tax debt collection process?
Here’s a look at how long a tax liability can follow you, what rules the IRS must follow on their end, and what an unpaid tax bill can mean for you and the rest of your assets.
In this guide:
What is the 10-year rule?
Every tax liability has what’s called a Collection Statute Expiration Date, or CSED. This CSED date is the government’s statute of limitations on your debt, or the maximum period of time that the IRS has to try to collect the debt.
Each individual tax liability has its own CSED, which is calculated from the date of assessment of the tax. This means that the clock starts ticking on the day that the IRS calculates your tax debt, regardless of whether or not you filed a tax return. The CSED for that tax liability is calculated as 10 years from the date of assessment, meaning that the IRS can choose to pursue that debt (if unpaid) for at least a decade.
This 10-year rule applies to tax debts that arise from returns that you voluntarily file with the IRS, amendments to returns that you voluntarily file, substitute returns that are filed after you fail to file a return with the IRS, or audits and penalties.
If you file your taxes using false or fraudulent information, and the correction of this information results in an increased tax liability, a new CSED would begin on the date that the IRS makes the correction.
With all of that said, the 10-year rule is really a general guideline. This timeframe can be both suspended, temporarily or permanently, or extended, depending on the circumstances.
Pausing or extending tax debt collection
There are different situations that could result in the shift of a taxpayer’s CSED, depending on how the tax debt is managed.
The 10-year CSED of a specific tax liability can be temporarily suspended if:
- You file for bankruptcy
- Apply for an installment agreement
- Submit an offer in compromise
- File an innocent spouse claim
During a suspension, the IRS cannot actively attempt to collect the debt. However, if that specific situation ends, such as failing to follow through with a payment plan, the IRS can resume collection activity. In this case, the remaining time left on the original 10-year CSED starts ticking again.
A CSED can also be extended in some cases, giving the IRS a total of more than 10 years to attempt to collect a tax debt. Extensions can occur following the finalization of certain petitions, requests, or filings.
For example, if you file for bankruptcy, your CSED will be suspended while the bankruptcy is pending, and the IRS cannot attempt to collect on the debt during this time. Once the bankruptcy filing is concluded, though, the CSED will be extended for an additional six months, during which the IRS can continue attempting to collect your debt.
How to find your tax balance and expiration date
If you have a tax liability, it’s important to know how much you owe and how long the IRS can attempt to collect it. If you don’t have either (or both) of these pieces of information, there are a few ways to obtain them.
The first option is to call the IRS and request information on the tax debt as well as the original date of assessment. From that date, you can calculate the original CSED, assuming there haven’t been any suspensions or extensions. Taxpayers can call the IRS at 800-829-1040.
If you are working with a third-party—such as a tax preparer or other professional—they can call the Practitioner Priority Service (PPS) on your behalf to request a transcript. This report will outline each of your tax liabilities as well as when the debt was originally assessed.
Phone lines at the IRS are often backed up, as service can be very limited. For this reason, requesting a tax transcript online may be the fastest and easiest way to find both your total tax liability and the statute of limitations on that debt. To complete this request, you’ll need to create an account if you don’t have one already and verify your identity.
Lastly, you can request that a tax transcript be sent to you by mail. This is generally not as quick as getting one online, but may be easier for some taxpayers. Requesting a transcript by mail can be done by calling the IRS at 800-908-9946 or by submitting an online form.
>> Read More: How to check your tax balance
What to do if you owe the IRS
If you owe money to the IRS for delinquent taxes, you might be unsure of what to do or how exactly to handle your debt. One of the worst things you could do is simply wait for the IRS to chase you down for payment.
The IRS can create a lot of headaches in the form of liens and levies in pursuit of your back taxes, and you can be expected to accrue all sorts of penalties and interest charges.
Instead of ignoring an IRS tax debt, consider your options for tax relief. These could include working with the IRS directly to:
- Set up an Offer in Compromise. If paying your tax debt would result in financial hardship, you may be eligible for an Offer in Compromise. This enables you to settle your debt with the IRS for less than you owe, considering factors such as your income, expenses, and asset equity.
- Request an installment agreement. Setting up an installment agreement plan with the IRS not only allows you to spread out your payments over a manageable period of time but also suspends collection activity and possible levies in the interim. There are short- and long-term payment plans to choose from depending on how much you owe. It’s important to note that setup fees for the installment plan and interest on the balance still apply.
- Ask for penalty or interest abatement. If you have already established a payment plan for your current debt, you may be able to get some or all of your penalty and interest charges waived. These added fees can be reduced or removed for certain taxpayers who qualify for first-time penalty abatement and even in cases where the taxpayer believes that they received incorrect verbal advice from an IRS administrator.
You may also consider hiring a third-party tax relief company to work on your behalf. These firms offer their professional guidance throughout the tax debt process and help taxpayers apply for an Offer in Compromise or seek penalty abatement. But there are costs involved with hiring one of these companies, and there is still no guarantee of tax relief.
Owing money to the IRS can be costly and downright scary. While an IRS tax debt will eventually expire, the road to the end of that statute of limitations can be treacherous. Rather than ignoring your tax debt, consider whether you can use the many tools and services available to you to manage or reduce what you owe.