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Representing the Troubled Taxpayer: How to be free of tax debt

How to be free of tax debt by letting the statute of limitations on collection expire

10-Year Rule

The IRS normally has 10 years per IRC §6502(a)(1) from the date of assessment of a deficiency to take collection action or to sue for a judgment, upon which the time period for collection is determined under state law. However, there are known exceptions to this 10-year rule:

  1. Submitting a request for an Installment Agreement.  This extends the time period during the pendency of the request. The rejection or termination of an Installment Agreement extends the time period during any appeal, but for no less than 30 days.
  2. Submitting an Offer in Compromise.  This extends the time period for its pendency, plus 30 days.
  3. Filing of bankruptcy or other court proceeding.  This extends the time period for its pendency, plus six months.
  4. Filing a Collection Due Process (CDP) Appeal.  This extends the time period for its pendency.
  5. Signing a Consent to Extend the Time to Assess Taxes.  This extends the time for the period specified in the consent.

Trust Fund Recovery Penalty Matters

The statute of limitations also often becomes an issue in Trust Fund Recovery Penalty matters.  In these scenarios, the IRS has three years from the later of the date the Form 941 was filed or the April 15 of the calendar year following the year to which the taxes apply to make a personal assessment.  In many cases, this statute of limitations is missed.


More on Representing the Troubled Taxpayer

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Installment agreements

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How to handle the non-filer, federal and Maryland guidelines

Handling an administrative appeal and beyond

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Strategy for a routine examination