The Internal Revenue Service possesses a great deal of authority with regard to tax collection methods. But the IRS must follow a set time frame, or statute of limitations, to collect back taxes, and the taxpayer is not responsible for paying any tax owed once the statute of limitations has expired. Fortunately, understanding the statute of limitations and how it applies to any tax you owe is relatively easy.
Generally, the statute of limitations for the IRS to collect money from a taxpayer is no more than 10 years from the date of assessment. The date of assessment could be the date on which the IRS received a return with a balance due or the date the taxpayer was assessed a balance due as the result of an audit.
How It Works
Collection enforcement includes the issuance of a lien or levy. As long as the 10-year statute has not expired, the IRS can take aggressive enforcement action against a taxpayer including, but not limited to, garnishing a taxpayer’s wages, levying his bank account and even seizing the his property. Once the statute has expired, however, the IRS can no longer take enforcement action to collect on the taxes owed.
Once the statute of limitations has expired, you may receive a lien release letter advising you that your lien is no longer in force. Outside of this, the IRS has no obligation to advise you of when your statute of limitations expires. It is your duty to make yourself aware of the date of your tax assessment and statute expiration.
There is no statute of limitations for fraudulent income tax returns. If the IRS makes the determination that you intended to defraud the government, the agency can pursue you for collection of the unpaid tax indefinitely.
The statute is often extended by an agreement between the IRS and the taxpayer. An example of a circumstance that may require an extension of statute is that of an installments agreement in which the monthly payment amount would not pay the total tax (plus penalties and interest) before the statute expiration. In such a case, the IRS might agree to the installment agreement monthly payment amount only if the taxpayer agrees to extend the statute of limitations.
Denise Caldwell is a finance writer who has been writing on taxation and finance since 2006. Her articles appear regularly on websites such as Gomestic.com and MoneyNing.com. She has taken what she learned while working at the IRS to provide readers with helpful tax and finance tips. Caldwell received a Bachelor of Arts in political science from Howard University.