The term ‘tax’ is not new to anyone. All of us pay taxes to our respective state authorities in return for the services they offer. Taxes are important for the smooth functioning of state machinery and countries where citizens do not regularly pay taxes often face financial crises and the citizens also suffer from lack of facilities and services whose provision is the responsibility of the state or the government.
In U.S. too, the citizens are entitled to pay certain taxes to the government in return for the wide array of services they get from the state. The U.S. tax system largely depends upon the voluntary action of filing tax returns by the U.S. citizens. All adult citizens of U.S. are supposed to file their tax returns, every year, to the IRS.
IRS stands for Internal Revenue Service and is the official body responsible for collecting taxes in the United States. Filing tax returns and dealing with IRS is not an easy job for a large number of U.S citizens. People who owe taxed to the IRS especially have to face a lot of issues while dealing with the IRS because of unawareness of the rules, legal procedures and how to deal with them. People with back taxes often dread dealing with the Internal Revenue Service and think when does IRS stop collecting back taxes.
Before explaining in detail when does IRS stop collecting back taxes, let us first see what ‘back taxes’ are.
If a taxpayer does not pay taxes on their due dates and thus owe taxes to the IRS then those taxes are called ‘back taxes’. Back taxes keep on accumulating over the years, if the taxpayer does not pay them, and then penalties and interests will also add up to them. Therefore, if you have not filed your tax returns or have not paid taxes on due dates for many years, chances are that you owe a large amount of money to the Internal Revenue Service.
Back taxes can be at state, federal or/ and local levels.
Back taxes, when gets accumulated for several years, become a serious problem for many people, especially if they are not in the financial position to pay the unpaid taxes. In such situations, most people try to negotiate with the IRS, mostly with the help of a legal advisor, to get ‘Offer in Compromise’ and get worried by thinking that when does IRS stop collecting back taxes?
Recently, the IRS has given the responsibility for collecting the back taxes to a private collection agency.
How to pay your Back taxes?
Instead of asking everyone when does IRS stop collecting back taxes? It is better that you look for ways to pay them because your obligation to file back tax returns might not go away for several coming years. Although paying back taxes can be difficult for many people but it is definitely not impossible so catch up before you have to face serious penalties by the IRS. Follow these simple steps to file your back tax returns:
1. Gather complete information
Collect all the information regarding your income, capital assets you sold (if any) and your previous 1099 and W 2 forms for all those years you are entitled to file tax returns. However, if you do not have copies of your previous W 2 or 1099 forms, you can get their copies either from your employer or fill the 4852 form to request a replacement from the IRS.
While you wait for the replacement, pay the tax according to an estimate of your income in order to stop interests and penalties from mounting up and save yourself from getting concerned about when does IRS stop collecting back taxes.
2. Identify your exemptions and deductions
While filing your back tax returns, see if you qualify for any exemption or deduction in order to decrease the amount of tax bill. For this, collect all the documents to prove or support every exemption and deduction claim you make.
3. Get the right forms
Getting the right forms for filing tax return for every year is very important because you need to file your back tax returns on the original tax form of each year. Taxpayers, while filing back tax returns, often make mistake by using the tax form of the current year and then end up in repeating the whole tiring process and asking when does IRS stop collecting back taxes.
Forms for every year can be collected either from the IRS or from the Turbo Tax Website.
4. Fill the forms carefully
Read instructions carefully while filling out all the forms because tax laws change over time and hence, the amount of tax you need to pay for each year varies. This is important to save yourself from asking when does IRS stop collecting back taxes.
5. Send the tax returns
Once you are sure that you have filled out the right forms correctly, send all of your back tax returns, along with complete set of supporting documents, to the address given in the instructions. But do keep a copy of the complete set with you, as a proof, and do not worry about when does IRS stop collecting back taxes.
When does IRS stop collecting back taxes?
If you are tired of dealing with the IRS with regard to your back taxes and wonder when does IRS stop collecting back taxes? There is good news for you.
The Internal Revenue Service is given a time period of 10 years, by the Internal Revenue Code, to collect tax debts from a taxpayer. This is called ‘Statute of Limitations’ on the IRS for collecting back taxes. After this ten year period, all the remaining debts of a taxpayer are forgiven and the person no more has to deal with the IRS with regard to his/ her back taxes.
So, stop questioning when does IRS stop collecting back taxes and see how much time to your 10year period is left. The IRS starts calculating the time from the time it assess your back taxes. This means that when the IRS finds out that you have tax debts they start calculating the 10 years time period of a taxpayer. This process is called ‘assessment’ and it usually takes place when:
- The IRS gets to know that you owe tax money when you file your tax return.
- In case you do not file tax return, the Internal Revenue Service will estimate your tax return and add the estimated amount of money you owe in their official records.
- When the IRS completes the audit of your tax returns
The Internal Revenue Code6502 (a, 1) holds the legal answer to your question when does IRS stop collecting back taxes. It states that after the Internal Revenue Service completes its assessment, it has a period of 10 years to collect back taxes from a taxpayer, during which it can either seize a person’s salary, bank account and possibly his property but once the 10 year time period is completed, the IRS cannot take any action against the taxpayer and all of his/ her remaining tax debts are forgiven.
In order to know when does IRS stop collecting back taxes and how much time is left until the expiration of ten year period, in your case, you can either directly contact the internal Revenue Service or take help of a professional attorney to get the transcripts of your IRS account which will confirm the end date of your 10 year period.
How to pay tax debts when you are facing financial issues?
Are you facing financial hardships and often find yourself asking when does IRS stop collecting back taxes? Do not worry. There are three ways to pay your back taxes to the Internal Revenue Service if you are experiencing financial troubles and hence, unable to pay all back taxes at once.
- You can request an installment agreement to the IRS in order to pay your tax debt. After getting the installment agreement, your tax liability will be divided into per month installments for a period of time over which both you and the IRS agree.
- Request an Offer in Compromise. Offer in Compromise is basically negotiation with the Internal Revenue Service and if you get it, the IRS will decrease the amount of tax that you owe.
- The last way is to declare your liability as currently non-collectible. This can be done in a situation when you are experiencing grave financial issues and earning money less than your expenses. In such situation, the IRS will give you a break from tax debts payment for a year or two.
No matter what option you choose, according to your situation, it is important that you contact the Internal Revenue Service and make s deal rather than keep ignoring your tax debts and then end up asking when does IRS stop collecting back taxes.
Factors that can extend the collection period
Although the Internal Revenue Service can only collect back taxes for a period of ten years, starting from the day your tax was assessed, but there are some factors that can extend the collection period and give more time to the IRS to collect back taxes from a taxpayer so, it is better to know them rather than asking when does IRS stop collecting back taxes later. They include:
- Filing for an Offer in Compromise
- Filing Appeals
- Filing Bankruptcy
- Filing court case against the IRS
- If you sign a collection wavier form i.e. either form 2750 or 900
- If you stay outside the U.S. continuously for at least six months.
- Military deferment
All these actions halt the Statute of limitations for the time a request is under consideration and in some cases for some time after a verdict is issued on a request. In short, the statute of limitation stops during the time when the Internal Revenue Service is officially unable to collect back taxes from a taxpayer.
So, think before making any such request because you can unintentionally extend the time period for collection of tax debts and then worry about when does IRS stop collecting back taxes.
How to know when your Statute of Limitation is expiring?
In order to know when does IRS stop collecting back taxes, it is important that you know when is your statute of limitation is ending. The Internal Revenue Service does not inform you about the expiration of your 10 year collection time period. However, they will stop collecting or sending notices to you after the expiration of your Statute of Limitations and you will no longer have to be anxious about when does IRS stop collecting back taxes.
If you want to know how much time is left in the expiration of your statute, you need to contact the Internal Revenue Service and ask them. You can also take professional help in this regard, a professional attorney will not only help you in finding out the remaining time period of your statute but will also suggest the most suitable option for you to pay tax debts, accordingly and thus saves you from worrying about when does IRS stop collecting back taxes.
What will happen after the expiration of Statute of Limitation?
Once your Statue of Limitations is expired, you do not need to get concerned that when does IRS stop collecting back taxes because the Internal Revenue Service is no longer allowed to collect back taxes from you, in accordance with the Internal Revenue Code. All your remaining tax debts will be removed from the IRS records and you will be free from the burden of back taxes.
But this does not mean that a taxpayer should wait for the expiration of his/ her Statute of Limitation and not pay his tax debts because in such a situation, the Internal Revenue Service could take some aggressive actions against the taxpayer in order to collect the tax debts. Therefore, the best way is to negotiate with the Internal Revenue Service and choose an option that will not only protect you from IRS’ aggressive actions but will also ensure that your statute of limitation does not stop and you do not get upset over when does IRS stop collecting back taxes.
If this is your case, then you can either opt for a low monthly installment agreement or request to place your account under the status of ‘currently not collectible’.
A request for Offer in Compromise is not recommended when your 10 year collection period is expiring in near future because the request for an offer in compromise will stop the Statute of limitation as long as your request is under consideration. So, think before filing an offer in compromise because you might find yourself asking when does IRS stop collecting back taxes?
What IRS can do when the collection period for a taxpayer is ending?
We all know that the Internal Revenue Service will become aggressive for collecting the tax debts when the statute of limitation of a taxpayer is near expiring. The IRS will take every legal possible measure to make you pay the tax debts, including seizers of your salary, bank account etc. But it can also try to take your consent for extending the statute of limitations. For that, the IRS may make you sign a 900 wavier form in order to extend the collection time period. Therefore, you need to be very careful while signing any document given by the Internal Revenue Service and read all the conditions carefully before giving your consent. The best way in such a situation is to contact a reliable legal advisor and seek his advice on the matter before taking any action.
Although rarely, but the Internal Revenue Service may also file a lawsuit for judgment in any case and that will extend the collection time, sometimes up to 20 years. However, it varies from state to state.
All taxpayers of the U.S. need to know all the details regarding back taxes so that they do not have to ask everyone when does IRS stop collecting back taxes?