How Long Can The IRS Pursue Unpaid Taxes?
Tax season can be stressful for many, but for those with unfiled returns or back taxes, it can feel overwhelming.
The Internal Revenue Service (IRS) is one of the most powerful collection agencies in the country and has significant authority to pursue unpaid taxes. However, the IRS is not allowed to go after these debts forever. Most debts, including tax debts, are subject to a statute of limitations, meaning there is a time limit on how long the IRS can pursue collection.
But the IRS operates under specific rules, and understanding the timeline for tax collection is more complex than you might think. It’s crucial to know the details if you’re considering waiting out your tax debt. So, how long can the IRS come after you for unpaid taxes? Let’s break it down.
How Far Back Can The IRS Claim Taxes?
Typically, the IRS has a 10-year statute of limitations to collect unpaid taxes. This period begins from the date the tax is assessed—either when you file your return, or when the IRS creates a substitute return on your behalf. Once this 10-year period ends, the IRS can no longer collect the debt.
However, there are important exceptions and conditions to keep in mind:
- Audit Periods: The IRS can audit your return for up to three years after you file it. If they believe you underreported your income by more than 25%, this period extends to six years.
- Unfiled Returns: If you haven’t filed a tax return, there is no statute of limitations. The IRS can pursue you for unpaid taxes indefinitely until you file.
- Fraud or Tax Evasion: If the IRS suspects fraud or tax evasion, they can pursue the debt indefinitely, as there is no time limit in such cases.
Additionally, certain actions can pause or extend the 10-year collection period, such as:
- Filing for bankruptcy
- Submitting an Offer in Compromise (OIC)
- Requesting a collection due process hearing
- Living outside the U.S. for extended periods
- Signing a waiver to extend the collection period
As a result of these exceptions, some taxpayers have found themselves facing IRS collections for tax debts dating back 15 years or more.
What Are Your Options For Handling Back Taxes?
Good news: you don’t have to wait for the statute of limitations to expire to resolve your tax issues. There are several ways to address back taxes:
Installment Agreements
If you can’t pay your debt in full, the IRS offers payment plans based on how much you owe and your financial situation.
These options include:
Short-term plans (120 days or less) with no setup fee
Long-term plans, which may require a setup fee depending on your income and payment method
- Offer in Compromise (OIC)
This program allows you to settle your tax debt for less than the full amount owed. The IRS will consider your income, expenses, and assets to determine if you qualify. - Currently Not Collectible (CNC) Status
If paying your tax debt would cause significant financial hardship, the IRS may temporarily classify your account as “currently not collectible.” While this pauses collection efforts, interest and fees will continue to accrue. - Penalty Abatement
In some cases, the IRS may remove penalties if you can show a reasonable cause for not filing or paying on time. Examples of qualifying reasons include natural disasters, illness, or receiving incorrect advice from a tax professional. - Tax Relief Services
If managing your IRS debt feels overwhelming, you can seek help from a tax relief company. These companies specialize in negotiating settlements and navigating IRS programs. Services they offer include:
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- Negotiating tax debt reductions through installment agreements, OICs, or penalty abatements
- Representing you in IRS audits to protect your rights
- Assisting with tax liens and wage garnishments
- Preparing unfiled tax returns to ensure accuracy and compliance
Conclusion
Understanding how long the IRS can pursue your tax debts is key when facing tax issues. While the 10-year statute of limitations provides some relief, various exceptions can extend that period. For unfiled returns or cases involving fraud, there is no time limit at all.
If you’re dealing with old tax debts, addressing them sooner rather than later can help you avoid collection actions and penalties. The IRS tends to be more favorable toward taxpayers who proactively address their issues rather than those who wait for collections to start. Whether you handle the matter on your own or with professional help, taking action early will provide you with more options to resolve your tax situation.
Source: CBS News
