Back Taxes and the Statute of Limitations. A True Story.

Back Taxes and the Statute of Limitations. A True Story.

Richard, a longtime client of mine, would have his tax returns prepared at my office every year. Without fail, he would bring his paperwork and 1099’s to my office the first week of April so I can file his return by April 15. And without fail, a couple of months later, he’d receive a notice from the IRS stating he owed money for the return he had recently filed. This had gone on since 1988.


The notices kept piling up and it reached the point where he stopped opening the IRS mail. He would just let it pile up on the corner table in his living room. This past April, Richard came to my office to bring his tax information to me and by April 15, his tax return was ready to be filed. This time was different. Richard said to me that he was going to pay the liability stated on his recently filed return. As it turned out, a family member had passed away and left him a tidy sum of money. Richard then contacted the IRS and requested a payoff amount for all his liability since 1988.

So what happened to the approximately $145,000 that Richard thought he owed?

Richard was astounded to learn that he owed significantly less than what he thought. The IRS stated that most of the years had “dropped off due to the Statute of Limitations” [and therefore no longer collectable by the IRS].” It turned out that Richard owed the IRS approximately $40,000, over $100,000 less than what he thought he owed.

The IRS stated that “most of the years had dropped off due to the Statute of Limitations” [and therefore no longer collectable by the IRS].”

Generally speaking, there is a 10 years Statute of Limitations for the IRS to collect the tax you owe. The time starts at the assessment date which is usually the date the return is filed. A 2012 tax return, for example, is generally filed in April of 2013 which would mean, barring some exceptions, the Internal Revenue Service has until 2023 to collect the tax or they will be barred from collecting on the 2012 tax year.


If you have filed an interim bankruptcy, filed an Offer in Compromise, are waiting for the IRS to accept you Installment Agreement request or have lived continuously outside the United States for a period of 6 months or more, the Statute of Limitations will be tolled or extended only for that period of time. Every taxpayer can contact the IRS and seek the Statute of Limitations. They will send you a printout for each year owed.

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