3 ACTIONS THAT CAN EXTEND IT
Tax problems do come to an end – the IRS has 10 years to collect a tax debt. But be careful: The time the IRS has to collect can be unknowingly extended by you.
The decisions you make in attempting to resolve your tax problem can impact when it ends. As your collection statute gets closer to expiring, carefully think through the benefits of taking any of the following actions that will extend it:
(1) Collection due process appeal. Timely responding to an IRS Final Notice of Intent to Levy – known as a collection due process hearing – will extend the time the IRS has to collect while your hearing is pending.
A really good strategy: A late-filed collection due process appeal – defined as filed within one year of the date of the Final Notice – does not extend the collection statute but does entitle you to an appeals “equivalent” hearing. See IRC 6330(e), IRM 220.127.116.11.6 and Treas. Reg. § 301.6330–1(g)(3), ex.1.
(2) Bankruptcy. Bankruptcy extends the statute of limitations on collection by the time you were in bankruptcy plus six months. If you filed bankruptcy but did not eliminate all of your tax liabilities, the IRS will have more time to collect the non-discharged taxes from you. See IRC 6503(h) and IRM 18.104.22.168.
(3) Innocent spouse relief. The collection period is suspended from the filing of the request for innocent spouse relief until the 90 day period for petitioning the Tax Court expires. If a Tax Court petition is filed on an IRS denial, time is tolled until the Tax Court decision becomes final, plus 60 days. See IRC 6015(e) and IRM 22.214.171.124.
The IRS gets more time because these actions prevent them from collecting from you. What the IRS gives you – no enforced collection activity – they get back. Before proceeding, always make sure the potential for success (i.e., high chance of offer acceptance) is greater than the risk of extending the collection time frame and making your problem linger.
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