Federal Tax Debt and Statute of Limitation

This is a discussion on Federal Tax Debt and Statute of Limitation within the Tax Issues forum, part of the Other Business & Finance Law Issues category; I am desperately in need of advice on a tax matter, and I'm hoping you can help. I owed federal ...

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Old May 20th, 2012, 09:04 PM   #1
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Default Federal Tax Debt and Statute of Limitation

I am desperately in need of advice on a tax matter, and I'm hoping you can help. I owed federal taxes in 1999 and 2000 but did not file a return for those years (long story; nearly $60,000 is owed with penalties/interest). The IRS filed SFRs in 2004, with a "date of assessment" as 3/15/2004. After filing bankruptcy in 2005, I started to receive letters from the IRS showing amounts due in 2006, and I've received these letters every year since with an astronomical amount of interest added (which is now three times the original debt). In 2009, the IRS filed a lien against me showing again 3/15/2004 as the date of assessment and 4/14/2014 as the "last day for refiling" (the lien). I thought of doing an Offer in Compromise in 2009 and filed Form 434 but was instead deemed as "Uncollectible." In 2010, I filed SFR Reconsideration letters, and the tax amounts were significantly reduced by doing this, yet penalties that were deleted previously were added back on (there is a line showing on my transcript that as of 5/23/2011, the prior tax was abated). By filing the original returns in 2010, did I unknowingly restart the statute of limitations, or will the date of assessment remain as 3/15/2004? Should I just let this go until the statute runs out since I'm considered uncollectible (and likely will remain so)?

I plan to go to our local IRS office to speak to someone about this, but I'm not sure if they'll truly work on my behalf since they ultimately want to collect. Any advice will be very much appreciated!
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Old May 20th, 2012, 11:51 PM   #2
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Default Re: Federal Tax Debt and Statute of Limitation

I wish to inform you that for collection the statute of limitations on collection is 10 years from the date of assessment. Further Statue of Limitation under IRS Code 301.6501(a)-1(a) for assessment is 3 years from filing. Therefore for federal taxes of 1999 and 2000 you may argue that Statue of Limitation will apply. You can argue that re-assessment in 2004 should be held time barred.

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Old May 21st, 2012, 08:52 AM   #3
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Default Re: Federal Tax Debt and Statute of Limitation

Thank you for your reply! I find mixed information on the Internet regarding this--some say that the statute of limitations NEVER runs out if the IRS files an SFR. The original amount of this debt was ~$23,000 (as said, it is now more than $60,000 with penalties/interest). I had two very good years doing textbook composition work until the company I subcontracted for began outsourcing to India. My income since then has been not so good, and any refunds (over $11,000) I was due have been intercepted by the IRS. This debt weighs heavily on me and I just want to get it over with. Thanks again!
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Old May 21st, 2012, 12:16 PM   #4
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Default Re: Federal Tax Debt and Statute of Limitation

The statute of limitations on taxes owed only is tolled by fraud. With this hanging over your head, especially if they have filed an intent to lien, bank accounts and any wages you collect are at risk.

It would not hurt to begin an officer of compromise and the amount you have been assessed makes that a reasonable option.
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Old May 21st, 2012, 09:24 PM   #5
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Default Re: Federal Tax Debt and Statute of Limitation

Thank you for your response. I have considered the OIC but then heard how often cases weren't accepted and also how the IRS remains on one's back for an additional 5 years. While I'm not concerned about being compliant from this point on, it is cumbersome to think that they'll continue to be "attached" to me in that way. I made a stupid mistake nearly 11 and 12 years ago, and it has caused me great distress. How I wish I could take that back and do it right. I also wish that the IRS would have addressed this debt in a shorter time than 6 years after the debt was incurred. I heard NOTHING from them until then, when I got letters stating that I owed nearly $150,000 because of the original amounts on the SFRs, which included the interest and penalties. I have worked extremely hard to be sure to meet my bills and become a responsible citizen, yet I am getting to a point where the depression is becoming too much to bear. The only good factor is that I have a son whom I have taught a lot about not ever getting into debt, and he just graduated from college with a degree in nursing. It is my hope that he will not live a life consumed by debt and bad choices. Unfortunately for me, even though I've made a turnaround for years now, my past choices continue to haunt me in these ways, and until this huge debt is gone, I don't feel like I'll ever be free. I'm 50 years old and have pretty much lost my publishing career to too much outsourcing, have no savings, no retirement, no value in my modest home that is falling apart, and I am in no way extravagant but live quite frugally. Having this attitude is getting me nowhere. My apologies for the ramble--just feeling a bit hopeless at the moment.
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Old Nov 5th, 2012, 12:20 PM   #6
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Default Re: Federal Tax Debt and Statute of Limitation

Quote:
Originally Posted by Friend In Court View Post
The statute of limitations on taxes owed only is tolled by fraud. With this hanging over your head, especially if they have filed an intent to lien, bank accounts and any wages you collect are at risk.

It would not hurt to begin an officer of compromise and the amount you have been assessed makes that a reasonable option.
Friend in Court...

I have about a $36,000 debt (with interest and penalties) from 1995 taxes filed in 1996. Seventeen years later the IRS is still sending me notices and glomming on to my refunds, They did file a tax lien, but it expired and was not renewed. In 2000, I entered into a short-lived re-payment agreement in return for which I signed an agreement to not attempt to eradicate the debt though bankruptcy for ten years.

I have read that, in contrast to your statement that the statute of limitations is only polled by fraud, entering into a payment agreement with the IRS would also poll the statutory time limit for the period of the agreement as well. This would explain why the IRS is still considering the debt actionable.

I am hoping your information is correct, rather than what I had read. I am considering retirement and do not want the IRS to be attaching my SS check.

Does entering into a payment agreement poll the statute or not?

Thanks,

Harry
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Old May 5th, 2013, 06:44 PM   #7
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Default Re: Federal Tax Debt and Statute of Limitation

The normal statue of limitations for collection is 10 years, whether the return posted to your account is an SFR, substitute for return, filed by the IRS or one filed by you. The ten year statue starts on the assessment date. This is the date the IRS places your account on their books as an account receivable.

There are many events that can extend or suspend the original 10 year statue. Some of them are filing an Offer in Compromise, bankruptcy, or actually voluntarily extending the statue by signing a waiver. A waiver, or statue extension, is sometimes requested by the IRS with a long term installment agreement that will go past the original statue date.

The actual statue expiration date can be determined if you have a representative that knows what they are doing.
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Old May 6th, 2013, 11:35 AM   #8
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Default Re: Federal Tax Debt and Statute of Limitation

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Friend in Court...

I have about a $36,000 debt (with interest and penalties) from 1995 taxes filed in 1996. Seventeen years later the IRS is still sending me notices and glomming on to my refunds, They did file a tax lien, but it expired and was not renewed. In 2000, I entered into a short-lived re-payment agreement in return for which I signed an agreement to not attempt to eradicate the debt though bankruptcy for ten years.

I have read that, in contrast to your statement that the statute of limitations is only polled by fraud, entering into a payment agreement with the IRS would also poll the statutory time limit for the period of the agreement as well. This would explain why the IRS is still considering the debt actionable.

I am hoping your information is correct, rather than what I had read. I am considering retirement and do not want the IRS to be attaching my SS check.

Does entering into a payment agreement poll the statute or not?

Thanks,

Harry
I think you mean "toll" the statute, not "poll". That aside, though, there are agencies that specialize in delinquent tax defense and a consultation with one who has people on staff, often attorneys, who have worked for the IRS can get you the best results.
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Old May 6th, 2013, 04:51 PM   #9
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Default Re: Federal Tax Debt and Statute of Limitation

The IRS can attach your SS retirement.
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