Does the IRS Tax Debt expire after 10 Years?

September 15, 2022 | Tax Debt

The short answer to this question is yes, the IRS tax debt does expire after 10 years. However, there are a few things you should know about this expiration date.

The 10-year clock starts ticking from the date that the tax debt was initially assessed. So, if you owed taxes for the 2016 tax year, for example, but didn’t file the return until 2020, the 10-year clock would start ticking in 2020. In some cases, the IRS will file a substitute tax return, which would trigger the clock to start to tick when they file the return. This is known as a substitute return. An IRS substitute return is basically a return that the IRS prepares for you, based on information it obtains from your tax documents. Therefore, if you have not filed a return, but the IRS does, the 10-year clock will start ticking as soon as the IRS files a substitute tax return for you.

The IRS 10-year statute of limitations is tolled for any period during which an individual is subject to a valid IRS pending installment agreement. Basically, this means that the clock is paused while the IRS is considering whether to grant you a payment plan. So, if it’s 2021, and you haven’t filed tax returns for 2011 through 2020, and then you file in 2021, the 10-year clock starts ticking when the taxes are assessed, but when you request a payment plan it stops for a short time while the IRS considers the request. I had a client who approached the IRS about a payment plan in the past before I represented him and he could not work out a solution, so he agreed to a wage levy. Horrible idea. The IRS considered the pending installment agreement in effect for the whole time period (5 years) and now the IRS has 15 years to collect the tax debt.

The other main reason the 10-year statute of limitations is tolled is filing bankruptcy. So, if you file for bankruptcy in 2021 for older tax debt, the 10-year clock stops ticking while in bankruptcy.

Even if the 10-year expiration date has not passed, you may still be able to get relief from your tax debt. There are a number of different tax resolution options available, such as an Offer in Compromise or an installment agreement (part pay or full pay). An offer in compromise is basically where you propose a different payment arrangement to the IRS, outside of what they offer. For example, if your tax debt is $10,000 and you offer them $5,000 in an offer in compromise, they will consider it. If accepted by the IRS, then that means that once you pay off that $5,000 you tax debt free. A tax attorney can advise you on which option would be best depending on your circumstances.

Once the 10 years have passed, the IRS can no longer collect on the tax debt unless they go to court and sue you and create a judgment. If the IRS does not do this, this means that the IRS cannot garnish your wages, levy your bank account, or take any other action to try to get you to pay the tax debt once the “10 years” is over.

Attorney Timothy Hart

Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]