An Overview of the IRS 10-Year Statute of Limitations
If you owe money to the IRS, you might be wondering how much time the IRS has to collect it. Is there a statute of limitations on taxes owed? And do back taxes ever go away?
Generally speaking, there is a 10-year statute of limitations for the IRS to collect unpaid taxes. If the IRS doesn’t collect your taxes within this time frame, you don’t have to pay your tax balance.
For example, if you get the IRS to mark your account as currently not collectible (CNC) and the collection statute expires during that time, your tax bill will essentially disappear. There are also other ways that you can use the statute of limitations to your advantage, and it’s very important to note that the IRS often calculates the date incorrectly.
A tax attorney can help you ensure that the IRS has noted the correct CSED on your tax account. They can also help you look into situations where you can use this date to your advantage if applicable in your situation.
This overview covers the IRS 10-year statute of limitations and details you need to know. If you’d like to learn more about IRS statutes of limitations, don’t hesitate to contact us at Damiens Law at (601) 202-4745 to further discuss your tax concerns.
Key Takeaways:
- Statute of limitations – A law that limits how much time a party has to take legal action against another.
- Collection statute of limitations – The IRS has 10 years to collect taxes from a taxpayer after it assesses the tax.
- Tolling the statute – Steps like filing for bankruptcy or applying for tax relief can suspend the 10-year statute of limitations.
- Tax assessment and audit statute of limitations – After a tax return deadline, the IRS has three years to assess a tax or audit a tax return.
- Unfiled return statute of limitations – There is no statute of limitations on unfiled returns. The IRS can assess taxes related to unfiled returns at any time.
- Refund statute of limitations – Taxpayers have three years to claim a tax refund after the filing deadline.
What Is a Statute of Limitations?
A statute of limitations is a law that limits how much time someone (or the government) has to take legal action or take advantage of a legal right. These laws protect individuals or entities from legal action when so much time has passed that they can’t reasonably expect to defend themselves in a lawsuit or other legal action.
For example, imagine you get into a car accident where you and the other driver are hurt. However, both your car insurance companies pay out and cover your respective medical bills, lost wages, vehicle repairs bills, and so on. Then, out of the blue 10 years later, the other driver decides to sue you.
This doesn’t seem fair — it would be difficult for you to obtain evidence to defend yourself in court, and any witnesses you might have called may be gone. You may also discover that relevant traffic camera footage has been deleted by the Department of Motor Vehicles or the police department. That’s why the law puts limits on how long you have to bring forward allegations with most crimes.
The same principle applies to taxes, especially when the IRS tries to collect or assess taxes against you or any other taxpayer. It would be unrealistic (and unfair) to expect someone to keep tax records for over 10 years or deal with a bill that old.
10-Year Statute of Limitations for Tax Debt Collections
So, when does tax debt expire? In most cases, the IRS has 10 years to collect an unpaid tax bill from you. The IRS sometimes refers to the end of this deadline as the Collection Statute Expiration Date, or CSED.
This deadline applies to the collection of unpaid taxes but also to recovering any associated interest and penalties. The 10-year statute of limitations “clock” usually begins after the IRS assesses a tax against you.
Other IRS Statutes of Limitations
In addition to the 10-year deadline for collecting back taxes, there are other IRS statutes of limitations to be aware of, too, including the following:
Statute of Limitations on Tax Assessments
In most cases, the IRS has three years from the date a tax return was due or three years from when the IRS received your tax return (if it was filed late) to assess a tax. A tax assessment is the amount you owe that the IRS has calculated.
The tax assessment statute of limitations can be extended or suspended in certain situations, such as if a taxpayer reports 25% or less of their income on a tax return. If the taxpayer doesn’t file a tax return, the clock never starts, and theoretically, the IRS could go back an unlimited number of years to assess taxes against someone who hasn’t filed.
Audit Statute of Limitations
For personal and corporate income tax returns, the IRS has three years from the filing deadline or three years from the date you file to audit your return. For payroll returns, the clock starts on April 15, after the year the wages were paid.
In cases of fraud or income understatement by more than 25%, the agency has up to six years to do an audit. There is no audit statute of limitations if the return hasn’t been filed.
The audit statute of limitations is the same as the tax assessment statute of limitations. That’s because once a return has been filed, the IRS generally relies on the audit process to assess additional taxes.
Refund Statute of Limitations
The amount of time you have to file a tax return to claim a refund is called the refund statute of limitations. You have up to three years from the filing deadline to claim a refund. This rule applies to both originally filed returns and amended returns.
Exceptions to the 10-Year Rule
There are a few circumstances where the IRS lifts the 10-year statute of limitations. This is normally just a pause, or suspension, of the clock. The IRS may also extend the 10-year deadline, meaning they get more than 10 years from the date of assessment to collect a tax from you.
A collection statute of limitations with the IRS can get paused and extended if you do any of the following:
- Apply for an installment agreement. The clock is paused while the IRS considers your request.
- Appeal the IRS’ decision. If you appeal a rejected payment plan, the IRS will also suspend the CSED for the duration of the appeals process.
- File bankruptcy. The statute of limitations suspension lasts from the date you file your bankruptcy petition until the date the court closes your case, dismisses your case, or you receive a bankruptcy discharge. The CSED also gets extended six months after your bankruptcy concludes.
- Request a Collection Due Process (CDP) hearing. A CDP hearing request suspends the CSED until the IRS decides whether to grant your request. The suspension continues if you file an appeal, and if there are less than 90 days left on your CSED when the IRS makes a decision, the CSED receives a 90-day extension.
- File an offer in compromise (OIC). While the IRS reviews your OIC application, the CSED pauses. The CSED suspension continues for another 30 days if the IRS rejects your OIC application or if you appeal.
- Apply for innocent spouse relief. A CSED suspension will remain from when you request innocent spouse relief until you file a waiver or the 90-day window to petition the Tax Court expires. If you decide to petition, the CSED suspension stays in effect until the Tax Court makes a final decision. Filing an innocent spouse relief request will also extend the CSED 60 days, although this extension won’t apply to the CSED for your spouse.
- Enter a combat zone or carry out military service. While you are in a combat zone or carrying out your military service, the CSED gets suspended. When you leave the combat zone, the CSED gets extended 180 days. When your military service ends, the CSED gets extended 270 days from the date when the military notifies the IRS.
- Spend an extended period of time living outside the United States. For the most part, the CSED will be suspended while you live outside the United States continuously for six months or longer. When you return, the CSED will be extended by at least six months.
In some cases, the IRS may ask you to sign a waiver to extend the collection statute of limitations. Don’t do this without consulting with a tax attorney first.
Other Considerations Concerning Tax Debt Collection Deadlines
Before you plan on using any of the above information to help with your tax issues, here are three additional considerations:
- States can have their own collection statutes of limitations, which could be different from the collection statute of limitations that applies to the IRS. The period and suspension/extension terms could be different. For example, many states have up to 20 years to collect tax debts, twice as long as the IRS.
- Tax statutes of limitations also apply to taxpayers. For instance, if you want to claim a refund or tax credit, you’ll normally need to file an amended return within two years from when you paid the tax or three years from when you filed your tax return.
- Some tax issues have no statutes of limitations. If you file a fraudulent or false tax return, there is no time limit for the IRS to take action against you. Additionally, if you never filed a tax return, the IRS has as much time as it wants before it starts assessing and collecting your unpaid taxes.
Remember, the 10-year statute of limitation time limit only begins after the IRS assesses your taxes. If you don’t file a return, the 10-year clock never starts.
There is a unique deadline for each tax assessment. For instance, imagine that you file your 2023 taxes on April 15, 2024, and you owe $10,000. The IRS has until April 15, 2034 to collect that amount. But then, the IRS concludes on May 1, 2024, that you owe an additional $1,000. The IRS has at least until May 1, 2034, to collect that $1,000 tax balance from you.
Now assume the IRS completes an audit of your 2023 taxes on August 1, 2025. In that audit, the IRS concludes that you owe an additional $500. The IRS has until August 1, 2035, to collect that $500. So, there are now three different CSEDs stemming from your 2023 taxes.
FAQs about the IRS Statute of Limitations
Is there a statute of limitations on taxes?
There are a few different statutes of limitations related to tax debt. The IRS usually has 10 years to collect taxes you owe post-assessment. The IRS only has three years to assess additional tax or audit your return once it’s filed, and you only have three years from the original tax filing deadline to claim a tax refund.
When does tax debt expire?
If you have unpaid taxes, the IRS is only allowed to collect those taxes for a period of 10 years. However, it’s not a good idea to avoid paying until this statute of limitations expires. You’ll still be hit with significant penalties and interest during that time, not to mention potential asset seizure and legal action.
Can the IRS collect after 10 Years?
In most cases, the IRS only has 10 years to collect tax that was assessed. They can no longer collect from a taxpayer if that 10-year statute of limitations has passed.
Why is the IRS trying to collect after 10 years?
If more than 10 years have passed and the IRS is still trying to collect the tax debt, the expiration date may have moved back because the statute of limitations was paused and extended at some point in the last 10 years. Alternatively, the IRS may have miscalculated the expiration date and may be trying to collect the tax in error.
How far back can the IRS go for back taxes?
The IRS has three years to audit your tax return (six in cases where the income was significantly understated), and 10 years to collect tax from the date the tax was assessed. However, each time a tax assessment is made, a new collection statute expiration date may apply to the new balance due.
Do back taxes ever go away?
Yes, back taxes can go away if you don’t pay anything, and the collection statute expires before the IRS is able to collect the taxes involuntarily through wage garnishments or asset seizures.
If you have any further questions, Damiens Law can help. Reach out to us for a no-obligation consultation. Let’s solve your tax problem before it gets any worse.
