October 10, 2014

The IRS is working with taxpayers to help them settle their tax debt.

The statute of limitations on back taxes helps rid people of tax debts by placing a time limit on when the IRS can seek payment on a debt. After that time is up, the IRS can no longer attempt to settle the debt.

How long is the statute of limitations on back taxes?

The statute of limitations on tax debt is ten years, beginning from the initial tax assessment. At the end of at ten years the person is completely free of the debt.

Can the Statute of Limitations be extended?

There are some stipulations that can make those ten years spread out to an even longer period of time. Here are some reasons you may have an extended tax statute of limitations:

  • If you agree to an extension, your statute is placed on hold until that extension time is up.
  • If you file bankruptcy, your statute is placed on hold until six months after the bankruptcy and court proceedings have been finished.
  • If you leave the country for at least six months, the statute is placed on hold until you decide to return.
  • If you are making payment installment arrangements or request innocent spouse relief, the statute is placed on hold until the final decisions are made.

Also, in the case of civil tax fraud or evasion, the IRS can go back as far as it wants–the statute of limitations doesn’t apply.

They must get you to agree to any extensions or payment installment set up before they can continue to pursue you, and you will have to sign a waiver. Before you sign, be sure you understand what it is you are signing!

The Statute of Limitations: A Tax Break for All

The statute of limitations was put into place to give people a much deserved break, and a chance to be free from tax debt. It is important to know if it will benefit you and your current situation, before signing any documents or agreeing to an installment plan. For help, contact us at Optima Tax Relief today.

Related article: The IRS Statute of Limitations on Assessments