If you’re like many people, you may wonder how far back the Internal Revenue Service (IRS) can go to collect taxes owed. Fortunately, there are specific guidelines established by the tax collection statutes that provide some clarity on this issue.
What Are Tax Collection Statutes?
Tax collection statutes refer to a set of rules and regulations that govern tax collections by the IRS. These rules determine how long taxpayers have to file returns or claim refunds, as well as how long the IRS has to assess taxes or collect them from taxpayers who owe money.
The Statute of Limitations
The statute of limitations is an important aspect of tax collection statutes that determines how far back the IRS can go to audit or collect taxes. Generally speaking, for most types of taxes owed, including income tax and employment tax, there is a three-year limitation period for both assessment and collection.
However, if you fail to report more than 25% of your gross income in any given year, you could be subject to an extended six-year statute of limitations. Additionally, if fraud is involved in not paying your taxes properly, there is no limit on when the IRS can come after unpaid taxes.
Exceptions
There are also exceptions that apply depending on individual circumstances:
- Unfiled Returns: If a taxpayer fails to file a return at all ,the statute may not start running until one has been filed.
- Missing Returns: If a taxpayer’s past returns were never filed or they misplaced their copy then it may difficult for them prove when their statute begins due date.
- Unpaid Taxes Owed: In situations where unpaid taxes are associated with non-filed returns ,statute won’t initiate until return filings have been completed
- Bankruptcy : One will receive protection under bankruptcy laws that include stay preventing creditors from going after debts ,including federal tax debt.
Importance of Compliance
While tax collection statutes set some sort of limits on how far back the IRS can go to collect taxes, it doesn’t mean that you should take your tax obligations lightly. It’s important to be compliant with all tax rules and regulations since serious consequences could occur if you don’t fulfill them properly.
Wrap Up
Understanding tax collection statutes is crucial for taxpayers who are concerned about their unfiled or unpaid taxes. While the statute of limitations offers some protection against aggressive IRS collections, it’s always better to prevent those issues before they arise by complying with all relevant tax laws.
By following these guidelines and staying informed about changes in the law, taxpayers can avoid unnecessary stress related to audits, penalties, or legal action from the IRS while maintaining good financial standing.
FAQs
Sure, here are three popular FAQs about tax collection statutes and the IRS’s ability to collect taxes:
Q1. How far back can the IRS collect taxes that I owe?
A1: Generally, the IRS has ten years from the date of assessment to collect unpaid taxes. However, this time period may be extended if a taxpayer enters into an installment agreement with the IRS or files for bankruptcy.
Q2: Can my state also collect back taxes similar to how the IRS collects them?
A2: Yes, each state has its own statute of limitations for collecting past due income taxes; some states have shorter timeframes than others.
Q3: Does filing an extension affect how far back the IRS can go in collecting unpaid tax debts?
A3: No, filing an extension does not extend the amount of time that you have to pay your tax bill if you owe. The deadline for paying owed taxes remains April 15th (or another later date granted by filing Form 4868) but if it is paid on-time interest & penalty fees will be waived until Oct 15th .
