Stress Owing The IRS

How Long Can You Owe The IRS?

When it comes to taxes, it's important to understand your obligations and the potential consequences of not fulfilling them. Ever been curious about how long you can owe the IRS? Understandably, this is a common concern among taxpayers. Your answer will depend on the statute of limitations and the collection measures the IRS has in store.

In this blog post, we will explore the topic of how long you can owe the IRS and provide a better understanding of the time frame you may have to pay off your tax debts. In addition, we will explore all the payment options available and look into the potential repercussions of not settling taxes owed to the IRS. Understanding your tax obligations and the options available to you can help you make informed decisions and avoid potential penalties and interest charges.

What Is A Statute Of Limitations?

The Internal Revenue Service (IRS) has certain rules in place regarding the length of time taxpayers have to report or petition a tax liability. This statute of limitations applies to filing returns as well as amending existing returns, paying any taxes owed, and filing refund claims.

The timeframe for this limit varies between 3 years and 10 years depending on the situation and the type of taxes. For example, some laws state that individuals must typically file a return within 3 years from the due date or before their original return was filed; this time frame can be extended up to 6 years if an individual omits more than 25% of their total income when originally filing.

Individuals normally have 10 years from the assessment date for unpaid taxes to pursue any legal action for recovery. However, collection activities by the IRS will stop after 10 years even if there is still an outstanding unpaid balance. 

When Will The Statute Of Limitations Period Begin?

The statute of limitations typically begins the day after a taxpayer's return is due. If the IRS or state extends the filing deadline, then the period of limitation for assessment and refund will begin after that date has passed. For amended returns and refund claims, this process initiates when documents are filed.

It’s important to note that the statute of limitations can also be suspended or restarted in certain circumstances. For instance, if a taxpayer enters into an installment agreement with the IRS, it can lengthen the amount of time they have to pay off their debt. Additionally, any period when a taxpayer resides outside of the U.S. is excluded from the statute of limitations, potentially stretching out the time they have to settle any debt owed. 

What Happens If The IRS Statute Of Limitations Expires?

When the Internal Revenue Service (IRS) statute of limitations expires, the IRS can no longer pursue collection action against a taxpayer in regard to an unpaid federal tax debt. However, this does not mean that the taxpayer is completely off the hook. Even after this time has elapsed, interest and penalties will continue to be applied monthly until all taxes, interest, and penalties related to the debt have been paid in full.

Furthermore, if any additional applicable taxes are due from future years of tax filing, those will be added to the balance and must be paid off when filing income taxes for that year. It is important for taxpayers to consult with a trusted financial professional if they would like help understanding their rights and obligations regarding expired statutes of limitations on their federal debt.

What Are Your Options If You Can't Pay Your Tax Debt?

If you cannot pay your entire tax debt at once, there are options available to help you settle your balance with the IRS:

• Installment Payment Agreements: Taxpayers can choose from several installment payment agreements that allow them to pay their tax debt over time. This option requires taxpayers to make regular payments and adhere to specific terms and conditions.

• Offer In Compromise: You may qualify for an IRS program known as an Offer in Compromise (OIC). This program allows taxpayers to settle their taxes for less than the full balance they owe. To qualify, you must prove that your liability is correct but you do not have the financial means to pay it in full.

• Currently Not Collectible Status: The IRS may agree to postpone collection action if a taxpayer's current financial situation does not allow for repayment.

• Partial Payment Installment Agreement: This type of installment agreement allows taxpayers to pay an agreed-upon amount towards their tax debt over a period of time without additional interest or penalties.

No matter what option you choose, it's important to know that the IRS will still continue to charge interest and penalties until your balance is paid in full. Failing to pay taxes owed can result in a federal tax lien, levy, or even criminal prosecution.

Remember that the IRS will work with you if you cannot afford to pay. Knowing how long you can owe the IRS and what options are available for settling your debt can help make sure your situation is handled correctly and that you are not taking on unnecessary risks.

By understanding the collection measures the IRS has in store, you can ensure your rights are protected and take steps to pay off your tax debt. Taking the time to explore all available options will help make sure you settle your taxes in a way that works for your unique situation. 

 Final Thought:

The statute of limitations on IRS collections is generally 10 years from the date your return was filed or first became due, whichever is later. That means if you don’t file a return one year, the clock doesn’t start ticking until you do. In special cases, such as not paying taxes owed on income from illegal activities, there is no statute of limitations. If you have unpaid tax debt and can’t afford to pay it off in full, contact the IRS to discuss your payment options.

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