How Are My Back Taxes Affected By The Statute Of Limitations?

No one likes paying taxes, but there’s at least one thing worse: having to pay back taxes. Not only are you on the hook for money you couldn’t come up with in the first place, but that burden is cumulative on top of anything you owe going forward. Worse, you might be getting hit with a tax levy, a lien, wage garnishment or other penalties. It’s not a pretty picture, and even with the best of intentions, you could face an uphill battle to get out of it.

Fortunately, even the worst-case scenario here doesn’t last forever. The IRS has a statute of limitations of ten years on tax debt, so after that time they legally can’t collect back taxes from you anymore—or bother you about paying them. Liens and levies are canceled, wages stop being garnished, collectors stop contacting you. While a decade can sound like a long time to wait, if your situation is such that you just don’t have another option, knowing that after that time you’ll be free and clear can be some comfort.

There are a couple of catches, though. First, remember that the IRS begins to count your taxes upon assessment, not upon your filing or their informing you of them or even your making the first payment. So your idea of ten years and theirs might not exactly line up. Also, if you have multiple tax penalties, or back taxes in more than one year, each one has its own ten-year window.

If you enter into certain procedures during this ten-year window, the clock stops ticking until the procedure is over. Bankruptcy is the biggest example here: if you file Chapter 11, the IRS will stop trying to collect back taxes from you…until you’re out of bankruptcy again. And then they’ll restart the ten-year clock from that moment, not from when you declared bankruptcy in the first place. Same thing goes for when you ask for an offer to compromise, submit an innocent spouse request, or file a collections due process appeal—while those procedures can reduce or alleviate back taxes themselves if they’re approved, the IRS doesn’t count their filing and processing time toward the ten-year window if they’re declined.

Overall, though, the statute of limitations is good news. It may not be the easiest choice to wait out the IRS, and we hope that you’re able to pay what you owe without trouble even if it takes some time. But if that isn’t in the cards, it’s at least helpful to know that you won’t have to deal with back taxes forever.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.