The IRS has a secret, and they don’t want you to know about it. Not only because it is against their interest but also because it may mislead taxpayers. The IRS has a 10 Years Statute of Limitations in Salt Lake City, UT for collecting tax debt from taxpayers. After the statute of limitation expires, the uncollected tax debt older than 10 years is wiped from the IRS’s books that means the IRS has to write it off. This rule is against the interest of tax collecting agencies, so they don’t want taxpayers to know it or try to use it for evading tax. Let’s discuss how this statute works and what it means for taxpayers with large tax debt.
Let’s discuss how this statute works and what it means for taxpayers with large tax debt.
Advantages & Disadvantages Of This Rule
The first thing you need to understand is that, like most tax rules, this stature is complex and could be difficult to understand. Before planning to wait it out for 10 years so that the IRS’s collecting period is over, you need to learn about all the advantages and disadvantages of this rule. We will discuss some scenarios now for a better understanding of taxpayers.
What can the IRS do?
If you think that waiting out 10 years is a walk in a park, then you definitely haven’t dealt enough with the IRS. The IRS has a great arsenal of tax collecting tactics at its disposal. They can come after you to collect taxes right after you file tax returns. So waiting out will not be that easy as you might have thought.
What happens to unpaid taxes within a 10 years period?
Unpaid taxes are taxpayer’s liability. It is basically the treasury’s money that the taxpayer has to pay. For each passing day with unpaid taxes, the IRS charges interest on unpaid tax along with penalties. If you haven’t thought it thoroughly without consulting a tax debt expert, you can put yourself in a really bad spot.
You enter in Installment Agreement for a longer period and wait for 10 years to pass:
This might sound like a good plan to minimize the amount that you pay. However, it doesn’t work like that. Remember when we mentioned the rules being complex? This is exactly what we meant. The statute of limitation stops when you enter into any payment agreement with the IRS for the period of the agreement period. It is pertinent to mention here that the method of IRS for calculating 10 years period or Collection Statute Expiration Date (CSED) is different from that of taxpayers. That is why we recommend you consult your tax attorney before pursuing this.
The Statute Of Limitation Stops In The Following Conditions;
In case of bankruptcy
Using Offer in Compromise
Filing lawsuit against IRS
Being out of the US for more than six months.
Signing a waiver to extend the CSED(usually demanded by IRS when signing a deal)
There are many options for taxpayers to get relief in the payment period and amount from the IRS, the statute of limitations being one of them. The IRS will push hard during those 10 years by applying tactics like putting tax liens on properties.
Zee Maq is a content writer who specializes in writing business and finance content. She has nine years of experience and loves to provide problem-solving content to help people tackle challenges in their everyday lives.