However, the IRS works with taxpayers on an individual basis, so one person's tax debt burden could be completely forgiven, while another could be asked to pay their debt in full. This is because the agency only forgives the tax debt in situations that justify it. Under certain circumstances, the IRS will forgive the tax debt after 10 years. However, that 10-year period may be longer than expected, considering extended suspensions, the date of the IRS tax return compared to the date of your last return, and if you have been up to date with your tax returns since the debt period began.
Before making any agreement provided by the IRS, people with unpaid taxes should consult a tax professional. The date of the tax assessment is the date you will find on the document that serves as a notification of deficiency and is the date when the IRS agent who first discovered your debt filed the appropriate form. Your down payment should be 20% of what you offer to pay (if you pay in five or fewer installments) or your first monthly installment (if you pay in six or more monthly installments). Depending on your communications with the IRS over the past few years, as well as your financial situation and other possible measures that could suspend the 10-year period, the expiration date of your collection statute (CSED) may be further away from what you originally planned.
If the taxpayer has only one federal tax liability (and owes no money to another federal or state agency) and is struggling financially, the IRS can waive compensation and issue the refund according to OBR procedures. Again, the IRS offers several types of installment payment plans (and other payment programs) that you can use to pay over time. In addition, certain actions and agreements may require the signing of an exemption requiring the IRS to extend the statute of limitations, meaning that the 10-year period may not necessarily be absolute. Often, the IRS doesn't know what tax deductions or tax credits you might have been eligible for, resulting in a higher bill than you could have received if you had done it yourself.
In the case of the settlement of a tax debt on a tax return you filed (or on a substitute return that the IRS prepared on your behalf), this is the date the IRS recorded the amount of your taxes due and you can find it on your tax transcript. The deadline for requesting an OBR is after the refund return has been filed and before the IRS processes the return and clears the refund. However, the IRS Policy Statement 5-133 also states that management approval is needed to go back more than six years when it comes to the application of delinquency procedures. If you still can't pay your tax debt, your tax debt can remain in this state until the law is exhausted and your debt is forgiven.
When your tax debt is currently in uncollectible status, the IRS will review your situation annually and, if your circumstances do not change, your debt will remain in this state until the statute of limitations expires, at which point the IRS will cancel your remaining balance. In addition, it is your responsibility to obtain documentation from the IRS that shows that the tax debt no longer exists. Yes, in fact, the length of time the IRS can collect a tax debt is generally limited to ten years, in accordance with the IRS collection statute of limitations.
