TAX SETTLEMENT & OFFERS IN COMPROMISE
STATUTE OF LIMITATIONS
EXPIRATION OF TAX DEBT AND THE STATUTE OF LIMITATIONS
Ten Year Statute of Limitations
The general statute of Limitations on the collection of a tax debt is ten years from the date of assessment. When an assessment of tax has been made, the tax may be collected by levy or by a proceeding in court, but only within 10 years after the date of assessment. The statute of limitations can be extended beyond the ten year cap in many instances and there are many exceptions to the general ten year rule.
Voluntary Waiver Of The Statute of Limitations
The statute of limitations may be extended by a voluntary waiver entered into between the taxpayer and the IRS. While most voluntary waivers of the statute of limitations have been eliminated, a voluntary waiver can be sought in the following situations:
1. In connection with an agreement between the taxpayer and the IRS to release a Levy after the expiration of the otherwise applicable limitations period; or
2. In connection with an Installment Agreement, the payments under which would extend beyond the otherwise applicable limitations period.
Voluntary Actions That Extend The Statute of Limitations
The statute of limitations may also be extended by certain voluntary actions or activities of the taxpayer. They can be collection and non-collection activities. The following non-collection actions or activities can extend the statute of limitations:
1. The time during which the taxpayer's assets are under the control or custody of a court, plus 6 months;
2. The time during which the taxpayer is outside the U.S. for a continuous period of at least 6 months, and for 6 months after his return;
3. The time the IRS holds property wrongfully seized from a third party, or during which it wrongfully has a Lien in place against the property of a third party, plus 30 days;
4. The time when collection action is barred because the taxpayer is in Bankruptcy, plus 6 months.
Collection Related Activities That Extend The Statute of Limitations
The following collection related actions or activities that can extend the statute of limitations:
1. Requesting a Collection Due Process (CDP) Hearing, or seeking judicial review of the results of a hearing;
2. Seeking innocent spouse relief;
3. Filing an Offer in Compromise, or pursuing the Administrative Appeal of the rejection of an Offer in Compromise. The statute of limitations is extended or tolled for the period the offer is pending, plus 30 days;
4. Requesting an Installment Agreement, or filing an appeal of the rejection of an Installment Agreement request;
5. Filing a Request for Taxpayer Assistance Order by filing IRS Form 911 (Request for Taxpayer Advocate Service Assistance And Application For Taxpayer Assistance Order).
Compliance! Compliance! Compliance!
The importance of being current, or being in voluntary compliance, cannot be overstressed. If returns are not filed and taxes are not assessed, the statute of limitations period never begins to run. If returns are filed years later, the ten year statute of limitation period begins when the tax is later assessed. Not being in compliance can derail the entire settlement process, whether you are trying to discharge tax debts through bankruptcy, the filing of an Offer in Compromise, or by entering into an Installment Agreement. Income tax returns that have not been filed or taxes for the most recent years that have not been paid create a multitude of problems. We all know the three rules of real estate: location, location, location! Consider these the three rules of tax law: compliance, compliance, compliance!
Get a Game Plan!
Proper planning includes an understanding of how the rules regarding the statute of limitations apply to your case. A well devised plan for discharging tax indebtedness is important and almost impossible to achieve without the help of an experienced professional who understands the process or various processes that may be involved, what is possible and what is not, and the full range of remedies available. Remember, there are often multiple solutions to the settlement of a tax debt. As an experience attorney with over 30 years in practice, John Kachmarsky and the staff at the Law Office of John Kachmarsky have that knowledge and understanding.
Contact our Charleston, South Carolina law office today to make an appointment for an initial consultation.