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At Solvable, we care about your financial well-being and are here to help. Our research, articles and ratings, and assessments are based strict editorial integrity. Our company gets compensated by partners who appear on our website. Here is how we get compensated.
At Solvable, we care about your financial well-being and are here to help. Our research, articles and ratings, and assessments are based strict editorial integrity. Our company gets compensated by partners who appear on our website. Here is
A statute of limitations exists on back taxes, after which the IRS cannot recover back taxes.
If you’re considering exercising a statute of limitations, you probably need back taxes advice.
It’s wise to face up to your responsibility for back taxes.
If you have a back taxes that is past due, the IRS will attempt to collect on the money that you owe. Whatever your reasons for being past-due, the government has several options for recovery. They can impose a levy or lien on any income you receive or seize property you own.
By law, the IRS has a finite period of time in which to collect the money, a time period known as the statute of limitations on back taxes. This period is generally 10 years, but the statute of limitations can be extended under certain circumstances.
The Statute of Limitations on Tax Assessment
The 10-year rule for the collection of taxes can be misleading, as that time doesn’t start until the IRS assesses your tax liability and sends you a bill. If you fail to file a tax return, the IRS can file a substitute return and create a deficiency assessment, but the agency may not do so for up to three years after the due date.
The statute of limitations can be suspended by certain actions that you, the taxpayer, takes. The suspension period can extend from a few months to several years depending on your case. Any period of suspension will be added onto the 10-year statute of limitations. Actions that lead to suspension of collection proceedings include the following:
Requesting an installment agreement will cause the statute of limitations to be suspended from the date the IRS receives the request to the time the agency makes a decision. If the request is denied, an additional 30 days of suspension will allow you to appeal the decision.
Submitting an offer in compromise results in suspension for the same period as an installment agreement request.
Asking for a collection due process hearing within 30 days of receiving a final notice of intent to levy will suspend the statute for the duration of the pending hearing.
Requesting innocent spouse relief suspends the statute of limitations until the final decision of the tax court plus an additional 60 days occurs.
Living outside the United States for six consecutive months or more leads to suspension for the duration of your absence. This suspension will continue for six months after your return to the United States.
Serving in the military will get the action suspended for the duration of your service plus 270 days. If your service was in a combat zone, an extra 180 days will be added.
Filing for a taxpayer assistance order can be done when you have received a notice of a tax levy or lien that will cause you extreme hardship. The statute of limitations will be suspended while your case is being reviewed.
Filing for bankruptcy results in the court issuing an automatic suspension for the tax periods involved in your bankruptcy plus an additional six months. In this case, you want to understand when the suspension ends.
The IRS will rarely sue you for the collection of taxes due, but in this event, the statute of limitations would be suspended during this action. This suspension would also be the case if you were in litigation with the IRS.
Can You Voluntarily Extend the Statute of Limitations?
You can voluntarily agree to extend the 10-year period of the statute of limitations under certain circumstances. An extension would usually be for five years.
If you are struggling to pay your back taxes, but you are expecting to receive assets after the statute of limitations expiration date, you can agree to an extension as part of a tax resolution.
The IRS may approve a partial payment agreement if you agree to extend the date to enable collection of your back taxes.
In these cases, the statute of limitations will end 90 days after the expiration of the extension.
What Are the Penalties for Late Payment of Taxes?
The IRS can impose penalties and interest fees if you are late filing your tax return, make a mistake, or if you don’t pay the full amount of tax due. What fees you incur will depend on how late you make payment or the severity of the errors, but they could include the following:
If you file on time but don’t pay the total, you will be charged one-half of 1 percent of the tax for each month you owe.
If you file late, you will pay 5 percent of the tax owed for each month overdue.
Combined penalties are applied if you file late and pay late.
The federal short-term rate of compound interest will be charged, plus 3 percent.
Filing a frivolous tax return incurs a penalty of $5,000.
Mistakes will result in a fee of 20 percent of the underpayment.
Missing, False, or Fraudulent Tax Returns
In cases where the IRS can determine that you have willfully failed to file your tax return, or you have done so fraudulently, no statute of limitations will be applied to the collection of your back taxes. Furthermore, if the IRS chooses to prosecute you, you could face severe penalties and possible time in jail.
Solvable is a for-profit company that helps customers resolve their tax problems, but a free service for consumers. Partners cannot pay us to guarantee favorable editorial reviews or ratings. We do not publish favorable (or unfavorable) editorial reviews or assessments at the direction of an advertiser or partner. We always work to put consumers first and do our best to provide value in meaningful ways, but our reviews are subjective.
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Solvable is compensated by some of the companies seen on our website. Most often, Solvable receives fees when one of our readers clicks, fills out a form, applies for, or receives a financial product from one of our partners. We also earn fees for capturing consumer stories and writing about them, displaying advertising, having our partners sponsor certain parts of the site, and writing content that may be relevant to our partner and their audience. This compensation may impact where products appear on this site, including article pages, comparison listings, the order in which they appear or if they will even appear on a given page, and our matching recommendations. Solvable has not written about, reviewed, or rated all financial products available to consumers.
In addition, we may be compensated in the following ways:
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Marketing tax resolution, tax preparation, tax audit help and general tax assistance.
Referrals to services that help consumers with tax resolution, tax preparation, tax audit help and other tax issues.
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We hope that you find Solvable helpful in your efforts to get a fresh start.
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Potential savings may vary based on the interest rates, balances and remaining repayment term of the loans you are seeking to refinance. Your overall repayment amount may be higher than the loans you are refinancing even if your monthly payments are lower. Variable rate options will fluctuate over the term of your loan with changes in the LIBOR (or other index utilized by the lender) rate, and will vary based on applicable terms and presence of a cosigner. Fixed interest rates may be based on applicable terms and presence of a co-signer. Additional terms and conditions, and rates are subject to change at any time without notice and may not be available in all states or for all types of current student loans. Such changes should only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Lenders are required to provide every potential borrower with disclosure information before they apply for a private student loan. The Lender you select is required to provide you with an Application Disclosure and an Approval Disclosure within the application process before you accept the terms and conditions of your loan. solvable is not a lender or creditor, it does not offer, extend or alter credit terms. Only participating lenders can perform the full application and deliver the required disclosures, please ask your lender about rates, terms, fees, and potential discounts that may be available for each product.
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Loans in default generally cannot be consolidated until completion of a repayment trial plan so tell your lender if you are in default and determine relevant options (be wary of those asking for upfront fees as well)
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Congrats! You're One Step Closer To Resolving Your Tax Debt.