There are several reasons why a person might owe the Internal Revenue Service. This may include a financial hardship that hinders your ability to pay tax liabilities or failure to file your yearly tax returns. Regardless of the cause, when you find yourself on the receiving end of an IRS collection notice you have a major problem on your hands if you fail to take the appropriate actions.
Anyone who has been unfortunate enough to have experience with debt collectors can attest to the stress and anxiety that accompanies the collection process. Some consumers might even be familiar with the collection statue of limitations or amount of time allowed by law to collect a debt. Unfortunately, the IRS is not the average debt collector nor do all the same rules apply to their collection efforts. While many debts may become “un”collectible after the set number of years have passed (per each states Statute of Limitations), the IRS can collect on unpaid taxes for up to ten years without special circumstances. If you owe back taxes from 10 years ago or longer, you might feel you are safe from the long arm of the IRS collection department. That would be an inaccurate assumption and one that could cost you dearly. Here are a few reasons why the Statue of Limitations for the IRS may go beyond the standard ten-year rule.
- Filing an Offer in Compromise (IRS tax settlement)
- Filing for Bankruptcy
- The taxpayer is out of the United States
- Collection Due Process Hearing request
- The taxpayer in litigation with the IRS
- IRS sues taxpayer in Federal Court
- Taxpayer signs a Waiver form (often required for Installment Agreements)
When certain conditions like those listed above are met, the IRS may extend the length of time allowed to legally collect on back taxes. For this reason, it is important to fully understand your rights and obligations when it comes to money owed to the IRS. Other incentives to satisfy your tax liabilities include the following:
- Levy– When the IRS decides to take aggressive collection actions, you may find yourself on the receiving end of an IRS levy. This occurs when the IRS places a federal lien on your bank account, basically freezing you out of your own bank accounts.
- Lien– The IRS can also place a lien on your property and credit. This can lead to the seizure of assets that will then be sold in order to satisfy your debt to the IRS.
- Wage garnishment– The IRS may decide to hit you where it hurts immediately, your paycheck. Your employer will be contacted and required to withhold a percentage of your paycheck (up to 80%) to be used to pay off your tax liability.
For the average person, any of these collection actions will result in an extreme financial hardship. Avoid finding yourself on the receiving end of IRS collection actions by taking the necessary steps to satisfy your tax liabilities. When it comes to the IRS and tax laws, most people will benefit greatly by consulting an IRS tax lawyer or tax professional to help guide them through the process.