San Mateo, CA: YES---your tax debt has a built-in "sunset" clause and does not live forever!
Clients often feel the burden of their tax debt will be something they have to endure forever. IRS tax debts from many years past have not been dealt with except to hide the IRS envelopes in a drawer somewhere.
This burden has many negative effects; including feeling that it is futile to get help from a tax professional, pointless to file tax returns because the IRS is just going to take their money anyway, or working "under the table" for cash and thus risking their livelihood to stay anonymous and hide from the IRS.
Fear not! Old tax debts don't stay forever!
There is such a thing called a Collection Statute Expiration Date (CSED) in federal tax law. The CSED marks the end of the allowable collection period or the time period established by law for the IRS to collect taxes. The CSED is normally ten years from the date of the tax assessment.
Like everything in the tax world, this is not a hard and fast rule. There are several instances when the 10 years can be suspended (or tolled) for a period of time thus extending the 10 year limit. This is also an opportunity for the IRS to "turn on" the suspension of the statute and "forget" to turn it off---resulting in a tax debt that remains on the books even when it is not owed anymore. I have had clients come to me who were making payments on DEBTS THAT WERE EXPIRED--THEY LEGALLY DID NOT OWE THAT MONEY TO THE GOVERNMENT! They had no idea!
It is CRUTIAL to have a qualified tax professional examine your IRS account to give you a proper analysis BEFORE you decide what course of action to take, especially if you have "older" tax issues haunting you. Having that knowledge ahead of time will prevent you from paying a tax bill that you may not actually owe.
Kevin Rego
650-933-5222
Disclaimer: The information provided is intended to provide a general overview of the topic presented. It is not intended to be a legal interpretation of your individual tax or legal situation. If there is a conflict between the information provided and any legal authority implementing or interpreting the topic, the legal authority shall prevail. Always seek legal advice from a licensed attorney. This article does not in any way establish an attorney-client relationship. That relationship can only be accomplished with both parties signing a mutual, written agreement.
