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When the IRS Can No Longer Collect the Taxes You Owe

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There was an excellent article on the Bankruptcy Law Network recently talking about how long the IRS has to collect tax debt owed. In other words, what is the statute of limitations on tax debt?

The article was written in the context of bankruptcy, in the sense that you do not always need bankruptcy to get rid of tax debt, but it is a good thing to bear in mind overall when looking at your finances.

Ten Years and Counting

According to the Internal Revenue Code (26 U.S.C. §6502), the IRS has 10 years from the date the tax is assessed to collect it (assuming there has been no fraud). The important thing to bear in mind, however, is that this period can toll under certain circumstances.

Think of it in terms of stopping and starting a stopwatch that ticks away for ten years. Some of these are as follows:

  • If you file an Offer and Compromise with the IRS, for the time it takes for the IRS to consider it, and then another 30 days after rejection
  • If you have appealed a decision by the IRS to collect the tax by levy or seizure, for the time that is taken to review the appeal, plus 30 days
  • If you are out of the country for more than 6 continuous months, for the period of time that you are out of the country
  • If you file bankruptcy, for the period of time that you are in bankruptcy, plus six months, assuming the taxes are not discharged

Talk to an Accountant

This is not an inclusive list, and you should consult with a tax accountant before making any decisions, but it is something to bear in mind.

If a big part of the reason you are considering bankruptcy is tax debt, you should talk to a tax professional about whether the debt is too old to worry about; it may have gone away!

Perhaps I Can Help!

If you live in the Southern New Jersey, area, tax debt has you concerned, and you are thinking about bankruptcy, please feel free to call me at 856-432-4113 or contact my office through the web site to schedule an appointment in my Woodbury office.

If you have more questions about bankruptcy and are looking for more information, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

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