As a general rule, there is a ten-year statute of limitations for IRS collections. This means that the IRS can try to collect your unpaid taxes for up to ten years from the date they were evaluated. With some important exceptions, after the ten years have elapsed, the IRS must stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe money to the IRS.
The IRS gives eligible taxpayers up to 72 months to pay their tax debt in full. Keep in mind that interest and penalties will continue to accrue until the balance is paid. If you're due a refund in any subsequent tax year while you're in the plan, the IRS can subtract those payments from what you owe. If you didn't file a tax return, the IRS can create a replacement return for you and do a deficit assessment, which begins the ten-year period.
When you owe the IRS several thousand dollars, it can be stressful, but in most cases, you don't need to worry as much. Whenever you make payments by direct debit or a payroll deduction, you don't have to complete a collection information statement. The IRS also wants to know about your car payments, health insurance premiums, and court-ordered payments, such as reimbursements for Chapter 13 bankruptcy or child support payments. The type of settlement you can get depends on your situation, including how much you owe and how quickly you'll be able to pay the balance.
This bill begins the collection process, which continues until your account is satisfied or until the IRS no longer legally collects the tax; for example, when the collection term or period expires. The IRS offers options for people in difficult situations, including the currently uncollectible status and the compromise offer. An OIC is an agreement between a taxpayer and the IRS that resolves a taxpayer's tax liability by paying an agreed reduced amount. Regardless of how much you owe the IRS, if you can't make the payments, there are other options.
If your company owes more than that, you must provide detailed financial information in order for a payment plan to be approved. However, if you enter into an installment agreement with the IRS that allows partial payment of the amount due, you may have to sign a form to exempt the ten-year statute of limitations. The penalty for non-payment starts at 0.5% of the balance due per month (with a limit of 25% of the back taxes you owe). In addition to penalties and interest, there are other things the IRS can do to make you regret not paying your taxes.
For more information, see the Taxpayer Bill of Rights, Publication 1, Your Rights as a Taxpayer, Publication 594, The IRS Collection ProcessPDF and Publication 1660, Collection Appeal RightsPDF. Similarly, if you don't pay your AI payments and the IRS proposes to cancel the AI, the collection period will be suspended for 30 days. The IRS may temporarily suspend certain collection actions, such as issuing a garnishment (explained below), until your financial situation improves.
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