If you have been hiding from the IRS for a few years, or been listed as uncollectible, let the IRS statute expire.
The IRS has 10 years to collect from you after you file a return, their computers prepare a return for you, or you’re audited and tax is owed. This 10 year period is called the IRS statute of limitations.
Once these 10 years is over, the tax debt usually expired and you get to start over. This is called allowing the IRS statute to expire.
So, if you manage to stay under IRS’ radar for several years, you might run out the clocks by allowing the IRS statute to expire. Of course, if they find you or your bank accounts during this time, they might just take it all.
If you are nearing this IRS statute, DO NOT do anything to extend it. There are many ways to put the statute on bold, and none of them are good … again, assuming 10 years is almost up.
Basically, any time the IRS is blocked from collecting from you by law, the 10 year statute is tolled (paused). The following are the most common examples:
- Filing an offer in compromise
- Requesting an installment agreement
- Requesting a hearing on filing an appeal with the IRS
- Filing bankruptcy
However, one you are in an installment agreement, your IRS clock continues to run. If you can set up a partial pay agreement, you can pay a bit over the remainder of the statute, and then get a fresh start once it expires.
For example, let’s say you owe $200,000 to the IRS and your remaining statute of limitations is 4 years. If all you can afford to pay is $500 per month, then the IRS will collect this amount over 8 months ($24,000) and the balance, including tax, interest and penalties, will be forgiven.
So, if you have only a few years or months left, let the IRS statute expire. Don’t give the government even one extra day to take what’s yours.