Collection Statute Expiration
IRS
The tax code stipulates the IRS has 10 years to collect a tax debt. Once a decade has passed, the debt expires. If you hire us as your power of attorney, we can determine exactly when your debt is scheduled to expire or if the debt has expired already. Contact us today for a free consultation if you think your debt may have expired or is close to expiration.
Questions?
I have a tax debt from before 2010. That’s over 10 years ago, so shouldn’t it be expired?
The 2010 return would have been due in April of 2011, so the debt should have expired in April of 2021, right? Nope, unfortunately. The 10 years starts from the date of assessment. So if you filed your tax return late, or the IRS didn’t process it, then the 10 years starts from the date they sent you the first bill. The IRS may have assessed additional tax after the initial assessment date, as well, and that balance due will also have a 10-year timer associated with it. Please reach out for help determining the expiration of your IRS debt.
What happens to the tax debt after it expires?
When a tax debt expires with the IRS, the debt is ‘wiped out’ and no longer shows as an active debt. There is a record of you owing the debt on the transcript, but your responsibility literally disappears overnight. We’ve witnessed millions in tax debt expire in this fashion, and saved our clients millions of dollars that would have also been wiped away with the debt. Reach out for a consultation to see how close you might be to seeing your debt expire.
Will the IRS view the expired debt as income?
While there is a certain IRS logic consistent with the expectation that any debt they cancel or expire would be seen as income, the good news is that all tax debt which expires through the statute of limitations is not income. So while a credit card company may cancel the revolving debt you owe them, you will end up paying tax on that cancelled debt. But with the IRS, you are 100% relieved of the burden of the debt when it expires. It’s truly an amazing thing to witness our clients’ relief when we tell them the debt is gone, so call us today if you think your debt should expire soon.