Many people who owe back taxes might have heard about the IRS’s 10-year rule. With that, the IRS has 10 years to collect a tax debt after it has been assessed. However, once that collection period expires, the IRS loses its legal ability to pursue collection actions.
While that may seem like you just have to run out the clock, that is not always the case. So, what pauses the IRS 10-year collection statute in TN?
Here is a look at what can toll that time clock on your debt.
What Is the 10-Year Collection Period?
The IRS has a collection deadline known as the Collection Statute Expiration Date (CSED). In many cases, the CSED is 10 years from the date the tax is officially assessed.
But federal law allows the collection period to be suspended under specific circumstances. When that happens, the clock stops running for a period of time. However, it will resume. Unfortunately, that means the IRS receives additional time to collect the debt.
What can pause the 10 years? Here are a few events that toll the collection period.
Filing for Bankruptcy
When a taxpayer files for bankruptcy protection, the IRS is unable to pursue collection activities as the case is pending. Once the bankruptcy concludes, the IRS also receives an additional six months to collect. For example, if a bankruptcy case remains active for one year, the IRS may gain an additional year and six months to collect the tax debt.
Submitting an Offer in Compromise
While the IRS reviews an Offer in Compromise application, the collection statute is suspended. If the offer is rejected, collections can be suspended for an additional 30 days. If the taxpayer appeals the rejection, the suspension continues throughout the process.
Requesting an Installment Agreement
Many taxpayers enter into payment plans with the IRS to pay down their tax debt. However, requesting an installment agreement can be temporarily put on pause as the IRS reviews the request. If the request is rejected, the statute remains suspended for an additional 30 days.
Requesting a Collection Due Process Hearing
Some taxpayers might have received certain IRS collection notices with a right to request a Collection Due Process (CDP) hearing. If that request is filed, the collection statute is paused until the issue is resolved, including any appeals that may follow. Yes, this can provide an opportunity to challenge collection actions. However, it also extends the amount of time the IRS has to collect the debt.
Innocent Spouse Relief Requests
In some situations, tax liability comes from filing a request for Innocent Spouse Relief. When this request is pending, the IRS collection statute can be suspended. Once again, the suspension may continue throughout the review process and any related appeals.
You Cannot Count on the 10-Year Countdown
Unfortunately, one of the biggest mistakes is that you will be free of IRS tax debt in 10 years. The reality is different.
Bankruptcy filings, payment plan requests, appeals, Offers in Compromise, and other actions may overlap or occur at different points throughout the life of the debt. And when that happens, the clock pauses.
If you want to know the true Collection Statute Expiration Date, you need a review of IRS records and account transcripts. And that can be done with the help of an experienced IRS tax debt lawyer.
Don’t Assume the Clock Has Run Out
Many taxpayers believe their IRS debt is close to expiring but find out the IRS may have months or years to collect.
So, what pauses the IRS 10-year collection statute in TN? This can be anything from bankruptcy filings to payment plan requests.
If you are dealing with IRS tax debt in Tennessee and believe the collection statute may be nearing expiration, make sure to have your account reviewed. At Easter & DeVore, Attorneys at Law, we can help you avoid any unexpected surprises when dealing with the IRS. Schedule a consultation today to learn about your options.
