The IRS Statute of Limitations
The time to collect is called the statute of limitations. When that time expires, the tax liability dies with it. It doesn’t matter if the tax is one million dollars or ten cents; the taxpayer wins when time expires!
Ten Years to Collect. Section 6502 of the Internal Revenue Code limits the time the IRS can collect to ten years from the date the IRS puts your tax liability on its books, known as the date of assessment. The precise date of assessment can be obtained from the master file or on column four of an IRS tax lien.
What the IRS Does Not Want You to Know. Also in the site Library, we discuss two strategies—partial pay and currently not collectible—that make it possible to pay little or nothing until the statute of limitations expires. It’s absolutely vital to know the precise date on which the time to collect expires because it will determine the best strategy to solve the tax problem.
A taxpayer can unknowingly extend the statute of limitations. For example, an offer in compromise extends the statute of limitations for the IRS to collect. If the IRS does not have a lot of time left to collect, it may be wise to choose a settlement alternative that runs out the clock on the IRS.
Furthermore, choosing the right appeal is critically important because certain IRS appeals extend the time to collect, while others do not. For example, in some cases it’s better to intentionally blow the deadline to file a Collection Due Process Appeal and later file an Equivalent Hearing to prevent extending the deadline to collect.
TIP It’s usually wise to demand that the IRS apply any tax payments to the most recent tax liability and pay the recent tax balance before paying older liability. The reasoning is that the IRS’s right to collect older tax liability expires sooner than recent tax liability.
We can tell you exactly how long the IRS has to collect from you, and how you can guard against collection and elimiante the tax problem.
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