The Internal Revenue Service (IRS) is responsible for collecting taxes owed by individuals and businesses in the United States. There is a common belief that the IRS has 10 years to collect back taxes before the debt is wiped away. But is this really true? Can the IRS pursue tax debts indefinitely, or is there a statute of limitations on how long they have to collect?
The 10 Year Statute of Limitations
In most cases, the IRS does have a 10 year time limit to collect back taxes owed. This statute of limitations is set forth in section 6502 of the Internal Revenue Code.
The 10 year collection period typically begins once the tax is formally assessed by the IRS. This occurs after you file your tax return – the IRS has 3 years from the due date of the return to assess the amount you owe. Once assessed, the 10 year countdown starts.
If the IRS does not collect the full amount owed within this 10 year timeframe, the remaining unpaid portion becomes uncollectible. At that point, you would no longer owe the debt and the IRS could not pursue collection any further.
There are some important caveats and exceptions to the 10 year statute of limitations that are addressed later in this article. But in straightforward situations where you simply failed to pay the full amount due on your tax return, the IRS generally has a decade to collect before the debt is wiped away.
When the Collection Statute Expiration Date Arrives
The date that the 10 year collection statute expires is known as the Collection Statute Expiration Date, or CSED. The IRS is required to track and monitor the CSED for each tax debt.
As the CSED approaches, the IRS typically becomes much more aggressive in their collection efforts. They prefer to collect debts owed rather than have them expire unpaid. So you can expect significantly more contact from the IRS, including phone calls, letters, and potential enforcement actions like wage garnishment or bank levies.
Once the CSED passes without full payment, the remainder of the debt is forgiven. The IRS will no longer seek collection of the expired tax debt.
However, there are certain steps you may need to take to finalize the process:
- Confirm the debt expiration – Request an account transcript from the IRS to verify the CSED has passed and the balance owed is $0.
- Get lien releases – If the IRS placed a tax lien on your property, work with them to get the lien released.
- Request forgiveness letters – For expired debts of $50,000 or more, get written confirmation from the IRS that the debt is forgiven.
Taking these steps protects you from any further collection or enforced recovery actions by the IRS on expired debts.
Exceptions that Extend the 10 Year Period
There are a number of important exceptions and circumstances that can extend or pause the 10 year statute of limitations, giving the IRS more time to collect.
Some of the most common reasons the 10 year clock gets extended include:
- You filed late – If you filed your return after the due date, the IRS gets extra time to collect. The 10 years does not start until the late return is actually filed.
- You owe additional tax – If the IRS later determines you owe additional tax for the year, through an audit or other adjustment, this restarts the 10 year period to allow full collection.
- Payment plan – If you enter into an installment agreement or accepted an Offer in Compromise, this can extend the collection statute while the payment plan is pending.
- Bankruptcy – The 10 years is suspended while tax debt is subject to bankruptcy proceedings or litigation.
- Outside the U.S. – If a taxpayer resides outside the U.S. for at least 6 months, the IRS gets additional time to collect.
The IRS is not allowed to unilaterally extend the 10 year statute – they can only collect for longer due to specific tax code exceptions like those above. Many tax professionals recommend requesting an account transcript periodically to ensure the Collection Statute Expiration Date has not changed.
No Limitations Period for some Tax Debts
For most taxpayers and tax debts, the 10 year statute of limitations applies. But there are some specific types of tax liabilities that are not subject to any limitations period.
If you have any of the following outstanding tax obligations, the IRS can pursue collection indefinitely until the amount is paid in full:
- Taxes due to fraudulent returns
- Failure to file a tax return at all
- Employment taxes for household employees
- Certain estate taxes
The most common situation where the IRS has unlimited time to collect is when you fail to file a return at all. If you do not file, there is no statute of limitations. The IRS will be able to attempt collecting those taxes forever.
That is why it is extremely important to file all required returns, even if late. Once a delinquent return is filed, the 10 year clock starts which limits IRS collection time.
Strategies for Managing Old Tax Debts
If you have outstanding IRS tax debts that are approaching or past the 10 year statute, there are certain strategies to consider:
- Confirm CSED – Request an account transcript and verify when the Collection Statute Expiration Date should occur.
- Wait it out – If the CSED is soon, continuing to avoid IRS collection may let the statute expire.
- Pay minimum – Paying even a small portion can reset the 10 year statute of limitations.
- Settle for less – Offer a compromised settlement for a lump sum that is less than you owe.
- Request forgiveness – For large debts, request a formal cancellation letter after the CSED passes.
An experienced tax relief attorney or resolution firm can help analyze your specific tax situation and determine the optimal approach. The goal is to take advantage of the Collection Statute Expiration Date when possible, or negotiate the lowest payment amount to put old tax debts behind you.
Can the IRS Garnish Wages or Levy Accounts on Old Debts?
As the 10 year statute gets close to expiring, it is common for the IRS to ramp up collection enforcement actions. This includes:
- Wage garnishments
- Bank account levies
- Property liens
The IRS is attempting to collect as much as possible before the debt expires and becomes uncollectible. If you receive a wage garnishment or levy notice on an old tax debt, you may need to take action quickly.
You can request the IRS temporarily halt enforcement while you verify the CSED or pursue other resolution options. However, interest and penalties continue to accrue until the debt is paid in full or expires.
Garnishing Wages on Old Tax Debts
The IRS can issue a wage garnishment on outstanding tax obligations until the CSED passes. This allows them to collect directly from your salary or wages.
Federal tax levies require employers to withhold funds from each paycheck and send them directly to the IRS. This continues until the tax debt is paid, or until the 10 year statute expires.
Wage garnishments create financial hardship for many taxpayers living paycheck to paycheck. It becomes difficult to cover basic living expenses when a portion of your wages are sent to the IRS.
If facing an IRS wage levy, you may qualify to have it released under certain conditions – for example, if the levy prevents you from meeting necessary living expenses.
Levying Bank Accounts
Similarly, the IRS can levy funds from your bank and investment accounts to satisfy unpaid tax debts right up until the Collection Statute Expiration Date.
They do not need approval from a court or judge to impose account levies. The assets can be seized even if you dispute the amount the IRS claims you owe.
Having your bank account suddenly emptied creates major financial disruption and makes it impossible to manage ongoing expenses. Retirement funds like IRAs or 401(k)s may be protected from IRS levy in some cases.
You can challenge an improper bank levy and request an immediate return of the seized assets. But the fastest solution is to promptly resolve your outstanding tax balance – through payment plans or other options.
Can the IRS Renew Expired Tax Debts?
In most cases, once a tax debt expires and passes the Collection Statute Expiration Date, it becomes permanently uncollectible. The IRS can no longer pursue payment or take enforced collection against you.
However there are a few scenarios where an expired tax debt may be revived and renewed:
- You make a late payment toward the debt or otherwise acknowledge the old liability in writing. This restarts the statute of limitations.
- The original CSED was found to be wrong or invalid.
- You filed for bankruptcy and did not claim the old tax debt was uncollectible. The IRS has additional time to pursue collection after bankruptcy conclusion.
Unless one of these specific situations occurs, once the Collection Statute Expiration Date passes, you cannot be held further responsible for payment of the expired tax obligation.
Contacting the IRS About Old Debts
If you have received an IRS notice about back taxes more than 10 years ago, it is important to follow up directly with the IRS for clarification.
You have the right to verify:
- The date the original tax return was filed
- Any adjustments or exceptions that may extend the normal 10 year statute
- The current CSED that the IRS has marked for collecting the debt
In many cases, speaking to an IRS representative can identify errors in how long they have claimed to collect the old debt. Having accurate IRS records is key to resolving tax debts that may be nearing their expiration.
It also prevents you from overpaying on tax debts that cannot legally be collected anymore due to the statute of limitations.
Do Expired Tax Debts Affect Your Credit?
Unpaid tax obligations can severely damage your credit, including being flagged in your credit reports and lowering your overall credit score.
Once a tax debt drops off your credit report, it should not continue to impact your credit or ability to get loans anymore:
- Unpaid taxes – Remain on your credit report for 10 years from the assessment date
- Federal tax liens – Typically report for 15 years from when they are filed
- State tax liens – Varies by state, typically 7-10 years on a credit report
However, the IRS can renew expired tax liens by refiling them. This resets the clock and the lien will show on your credit report for another 15 years from the new filing date.
Getting the underlying tax debt resolved – through payment, settlement, or CSED expiration – is the best approach to remove negative tax information from your credit history.
Removing Paid or Expired Tax Debts from Credit Reports
Once a tax debt drops off your credit report or is fully paid, you can request the credit bureaus remove any lingering references from your credit history. This prevents any ongoing damage to your score.
Dispute the expired or paid tax debts with each credit bureau directly to clean up your credit reports after older IRS debts are resolved:
- Equifax
- Experian
- TransUnion
Being proactive about removing obsolete tax payment information helps improve your credit health over time.
Negotiating New Payment Plans on Expired Tax Debts
Once the Collection Statute Expiration Date passes, the IRS loses its ability to enforce collection of the amount you still owe. However, you can voluntarily enter new payment arrangements to resolve expired tax debts.
The IRS is typically open to payment plans or Offer in Compromise settlements, even after the CSED has passed and without renewing your liability. Some options include:
- Installment Agreement – Set up monthly payments based on what you can afford
- Offer in Compromise – One lump sum payment for less than the full amount owed
- Currently Not Collectible – No payments until your financial situation improves
Negotiating new payment plans for expired tax debt often provides the cleanest path to getting them fully resolved. The IRS is likely to be very open to agreements rather than losing out on the amounts entirely.
Should You Pay Expired Tax Debts After CSED?
You are not legally obligated to pay tax debts after the Collection Statute Expiration Date passes. The IRS loses their ability to enforce collection or impose penalties after the CSED.
However, there are some reasons you may want to consider voluntarily resolving old expired tax obligations:
- Allows you to move on and put the debt fully behind you
- IRS may be willing to settle for less through an Offer in Compromise
- Avoids hassles if IRS attempts to improperly revive the debt later
- Removes a potential barrier if applying for a security clearance
The optimal approach depends on your financial situation. Consulting a tax specialist can help decide the right strategy for old tax debts.
Hiring Representation for Expired Tax Debts
Managing tax debts with statute of limitations issues can be very complex. There are many nuances and exceptions around the CSED that determine your rights and responsibilities.
Experienced tax relief professionals can provide representation and guidance for situations involving:
- Verifying correct CSED dates
- Disputing collection actions on expired tax debt
- Negotiating settlements or payment plans
- Removing liens and correcting credit reports
Reputable tax resolution firms employ lawyers, CPAs, and former IRS agents who understand statute of limitation rules in depth. They work to leverage the Collection Statute Expiration Date to taxpayers’ benefit.
Representation saves you stress and prevents costly errors when managing IRS collections on old tax debts approaching their expiration.
Conclusion
The IRS typically has 10 years to collect outstanding taxes owed once an assessment is made. This Collection Statute Expiration Date allows taxpayers to move beyond old debts and avoid tax collections indefinitely.
However, the 10 year statute can be extended or suspended under specific circumstances. Consulting directly with the IRS and your tax history can identify whether any exceptions apply.
Expired tax obligations become permanently uncollectible once the CSED passes, although you can voluntarily repay afterwards. Strict statute of limitation rules play an important role in controlling how long the IRS can pursue payment of old tax debts.