IRS Statute of Limitations on IRS Collections

Thinking you will owe the IRS forever?  Many calls pour in to tax attorneys from taxpayers wondering whether the IRS “statute of limitations” will expire on an old IRS tax debt.  For the most part, the IRS has limitations on how many years it has to collect.

IRS tax debt assessment

The IRS generally has three years to assess taxes on a taxpayer from the due date of the return or when it was filed, whichever is later.   If there are unpaid taxes, shortly thereafter, an assessment is made when a certificate of assessment is signed off on stating the amount owed by a taxpayer.  See the IRS Procedures for Assessment of Tax under 25.6.1.9 in their Internal Revenue Manual.

Basics of the IRS Collection Statute Expiration Date (CSED)

As a general rule, there is a ten-year statute of limitations on IRS collections that begins to run from the date of assessment.   Thus, when you fail to pay in full when you file a tax return, the IRS will then mail you written notice of the amount due.  The date on this notice is generally your assessment date.  If you cannot find this first notice, you can find this date of assessment by ordering your tax account transcript.

Be aware, the IRS can prepare a substitute return (SFR) for you if you did not file.  See IRC 6020(b).  From this return, the IRS can make a deficiency assessment, which starts the ten-year period. Thus, not filing a return is the worst thing you can do, especially if you think you will avoid the IRS for ten years.  Check out this article on the consequences of late filing and what you can do about it.

Once the ten-year collection statute expires, the IRS can no longer collect upon your debt.  It essentially “falls off” from your account.  For example, if you filed your 2007 return by the due date of April 15, 2008 and the tax debt was assessed shortly thereafter, the CSED should have expired around April 2018.

If you are counting on the collection statute expiring soon, be sure to watch out.  As the CSED nears, the IRS typically gets very aggressive in its collection activities and often assigns a revenue officer on the case.  A revenue officer is an advanced tax collector that has many powers to quickly garnish wages and seize personal and real property.

For more information on the IRS collection statute, see the IRS Internal Revenue Manual.

Suspension or extension of the ten-year IRS statute of limitations

The ten-year collection period can end up lasting more than ten years because it can be suspended or extended for one or more time periods. Certain actions can suspend the running of time on IRS CSED’s, which also generally suspends the ability of the IRS to collect unpaid tax debt.  Some of the most common include:

1. Filing for bankruptcy. When you file for bankruptcy, the court issues an automatic stay preventing the IRS from taking collection action.  The suspension lasts for the period of the bankruptcy case plus six months.
2. Tax resolution determination. The period is also suspended while the IRS is considering your request (plus 30 days following rejection) for an installment agreement, offer in compromise or request for innocent spouse relief.
3. Partial payment Installment Agreement extension. If you propose a partial payment installment agreement (PPIA), the IRS will likely have you sign form 900 Tax Collection Waiver, waiving the ten-year limitations period. This extension can be no more than six years.  Be sure to carefully consider this extension.  It may be a wiser choice to refuse extending the deadline and let the IRS collect whatever it can before it runs out.
4. IRS suit in federal court. The IRS can also extend the ten-year period by suing you in federal court; however, it rarely does this.
5. Taxpayers who reside outside of the United States. The collection statute will be suspended if a taxpayer resides outside of the United States for six months or more.  Thus, the CSED will not expire until six months after the taxpayer comes back to the U.S.
6. Voluntarily extension of the statute of limitations period. If you agree to extend it, you can.  However, nowadays the IRS has limited powers to coerce taxpayers to do so.  As in the case above, the IRS can offer a reasonable partial payment plan if a taxpayer agrees to extend the statute.

Taxpayers needing tax help with regard to the IRS statute of limitations should seek the advice of a tax attorney.  The Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution. Our attorneys are primarily available to serve you in San Diego, Orange County and Los Angeles.  We are also available nationwide.  We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

The post IRS Statute of Limitations on IRS Collections appeared first on Delia Tax Attorneys Southern California IRS tax lawyers.

source https://deliataxattorneys.com/irs-statute-of-limitations-irs-collections/

IRS Revocation of Your Passport for Seriously Delinquent Federal Tax Debt

Do you owe the IRS and are trying to travel outside of the United States?  There is a ton of fear among taxpayers now who have recently received IRS Notice CP508C, Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the U.S. Department of State.  If you have received this, you may be worried about an IRS revocation of your passport.

The biggest concern for most is that they won’t be able to return to the U.S. if their passport is revoked during their trip. Below is some clarification on this issue.

Requirements for non-issuance/non-renewal or revocation of your passport

On December 4, 2015, Congress enacted Section 7345 of the Internal Revenue Code, requiring the IRS to notify the State Department of taxpayers certified as owing a seriously delinquent tax debt.  The IRS began sending certifications of unpaid tax debt to the State Department in February of 2018.

A seriously delinquent tax debt is tax debt (including penalties and interest) totaling more than $51,000 for which:

1) a Notice of Federal tax lien has been filed OR

2) a levy has been issued to collect upon the debt

If either of these two situations apply, when you go to apply for or renew your passport, the State Department will deny it.

Still, what if you have an existing passport?  The IRS notice states that if you have a valid passport, the State Department may revoke your passport or limit your ability to travel outside the United States.  What can you really expect from this?  How will they “limit your ability” to travel abroad?  Basically, you can use your passport until you are notified by the State Department that it has been “revoked” or “limited.”

If you are outside of the United States when the revocation occurs, the State Department may issue a limited validity passport good for a return to the U.S.  If you must travel and are deemed seriously delinquent, you can call the National Passport Information Center at 877-487-2778 to inquire about your situation.

For more information, the IRS issued Notice 2018-01 dated Jan. 16, 2018, and also has an IRS informational link on their website.

How to avoid being “Seriously Delinquent”

Section 7345(b)(2) provides that a seriously delinquent tax debt does not include the following:

• A debt that is being timely paid under an IRS-approved installment agreement under section 6159;
• A debt that is being timely paid under an offer in compromise accepted by the IRS under section 7122;
• A debt that is being timely paid under the terms of a settlement agreement with the Department of Justice under section 7122;
• A debt in connection with a levy for which collection is suspended because of a request for a due process hearing (or because such a request is pending) under section 6330; and
• A debt for which collection is suspended because the individual made an innocent spouse election (section 6015(b) or (c)) or the individual requested innocent spouse relief (section 6015(f)).

Additionally, an IRS revocation of your passport will not occur if:

• you are in bankruptcy
• you are identified by the IRS as a victim of tax-related identity theft
• your account the IRS has determined is currently not collectible due to hardship
• you are located within a federally declared disaster area
• you have a request pending with the IRS for an installment agreement
• you have a pending offer in compromise with the IRS
• you have an IRS accepted adjustment that will satisfy the debt in full

Also, certification will be postponed while an individual is serving in a designated combat zone or participating in a contingency operation.

Finally, even if the IRS certifies a taxpayer as seriously delinquent, the State Department holds the IRS’s certification application for 90 days to permit the resolution of the tax debt.

In summary, if the following occurs:

• The tax debt is fully satisfied or becomes legally unenforceable.
• The tax debt is no longer seriously delinquent (see above) or
• The certification is erroneous,

The IRS will reverse this certification to the State Department generally within 30 days and provide notification to the State Department as soon as possible.

Tax resolution options for tax debt

IRS tax debt comes about in many different ways such as audit, underreporting of income, or failure to withhold enough over the year.  If it is impossible to pay back the IRS, you may be able to negotiate an Offer in Compromise, settling your IRS tax debt for less than you owe. If the IRS accepts your offer, you can pay the amount agreed upon, and all federal tax liens will be removed (generally after one month of the final settlement payment).

It is highly recommended that you get a tax attorney to help with your offer. An offer in compromise takes much planning, strategy and advanced negotiation skills, not to mention it can take up to six months to a year to get accepted.

If you are not eligible for an offer in compromise, other options include:

• Currently Not Collectible (CNC) status—due to your financial hardship, the IRS will suspend collection activity against you. This is just a temporary fix, until your financial condition approves. It is a valuable resolution option because it can allow you time to get your finances in order.
• Payment plan/installment agreement– allows you to pay off your tax debt over time. Usual agreements range from three to seven years. You can elect to pay off the entire amount over time or attempt to negotiate a reduced payoff amount (i.e. partial payment installment agreement). With a PPIA, a full set of financials is required to be submitted to the IRS showing you can only pay a reduced amount.

If you are in fear about an IRS revocation of your passport or need assistance with other IRS tax problems, seek the advice of a knowledgeable tax attorney.  The Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution at (310) 494-0100. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

The post IRS Revocation of Your Passport for Seriously Delinquent Federal Tax Debt appeared first on Delia Tax Attorneys Southern California IRS tax lawyers.

source https://deliataxattorneys.com/irs-revocation-passport-seriously-delinquent-federal-tax-debt/