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Everything You need to know about Tax Debt Statute of Limitations

The IRS has 10 years to collect back taxes. This time limitation is known as statute of limitations. It is also commonly called the collection statute. According to the IRS, “a statute of limitation is a time period established by law to review, analyze and resolve taxpayer and/or IRS tax related issues.”

irs tax payment

This rule is not law, and therefore, can be broken by the IRS. There have been rare instances when the IRS tried to collect back taxes after the statute of limitations ended. Even after the death of a debtor, in rare cases, the IRS can seek repayment through the deceased individual’s estate.

Timeframes for Taxes

Along with the statute of limitations for tax debt (10 years), there is also a statute of limitations for an IRS audit (three years), and for tax refunds (three years). These are the general time limits that the IRS follows in most cases.

Tax Debt Collection

There are a number of reasons for the IRS’ inability to collect tax debt. These include:

  • The taxpayer is financially incapable of paying any amount in back taxes, or
  • The IRS cannot locate the taxpayer.

If during the statute of limitations, the IRS sees a significant increase in a taxpayer’s income and/or can locate the taxpayer, then they will collect whatever they can. During the collection time period, the IRS can employ aggressive collection methods.

The Countdown

The statute of limitations is counted from the day when your tax liability was assessed. For example, if your liability was assessed on April 30, 2015, the IRS has until April 30, 2025 to collect on the debt.

If you do not file your return, the IRS will file a Substitute for Return (SFR) to calculate your tax liability (this amount can also be determined following an audit).

If your tax debt has remained unpaid for eight or more years, you may experience more pointed IRS collection efforts. The earlier you address a tax debt, the easier it will be to avoid actions such as a wage garnishment or a bank levy.