Can your IRS debts expire?

Recently details have resurfaced about a 1989 IRS employee manual update which stipulates that in the event of a nuclear attack, the IRS will continue to collect taxes as usual within 30 days. Most people sharing this information are doing so in jest, but it reminds us all of the IRS' seemingly unstoppable pursuit of funds owed to them. The interesting thing about this information bout the IRS coming to light is that there are, in fact, limits to their ability to collect funds from taxpayers.

The IRS has a rule called Collection Statute Expiration which states that if the IRS has failed to collect your tax debt within ten years of assessing it, it expires, and you no longer have to pay. That doesn't mean that you can refuse to pay or flee the country for a decade to avoid paying your taxes. There are a couple of specific circumstances under which the IRS may be unable to collect.

First, the IRS is exceptionally underresourced to the point of not having the staff or funding to perform all of its responsibilities. This means that for some people, there is a chance that they just never get around to collecting your debt. If they are unable to do so for ten years, you will get away scot-free.

Another way a person might see their tax assessment expire is if their income is low enough that they are in a currently not collectible status. In this case, the IRS has determined that you cannot pay your debts and will continue to reassess. However, if you remain in that low-income bracket and are considered currently not collectible for ten years, you will see your tax assessment expire. Or, those placed in a partial pay installment agreement will only have to pay toward their debt for ten years, after which the remaining debt will be relieved.

Several things can extend your ten-year expiration date:

• Bankruptcy, 

• Collection due process hearing request,

• File an Offer in compromise to settle the debt, 

• Pending installment agreement.

If you fall into any of the categories listed above, the debt will not expire. You must be in regular communication with an IRS resolutions specialist who can help you understand your rights and responsibilities when it comes to your tax debts. When it comes to dealing with the IRS, there are fewer experts out there than you may think. At Fix-It Accounting, we have built our reputation on our ability to wade through the confusing details to help clients resolve IRS problems more efficiently and often less expensively. If you're currently in IRS debt and need help getting out, contact us today. We'd love to help.