Will Not Filing Taxes Cost You Forever?

Are You Still on the Hook With the IRS? How Far Back Can They Claim You Owe?

Do you ever lie awake at night, worried that the IRS might come knocking on your door, demanding payment for taxes from years ago? It's a common concern, and the thought of facing a large tax bill can be overwhelming. As Christians, we are called to be responsible stewards of our finances ¹, and that includes fulfilling our tax obligations. In Romans 13:7, the Bible tells us to "Give to everyone what you owe them: If you owe taxes, pay taxes." ² Thankfully, the IRS does have time limits for collecting outstanding taxes.  But Will Not Filing Taxes Cost You Forever? This blog post will explore the statute of limitations for IRS collections, helping you understand your rights and responsibilities as well as offer some biblical wisdom for navigating these challenges. 

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The Taxpayer Bill of Rights ensures taxpayers have certain protections when dealing with the IRS, including the right to know how long the IRS has to collect a tax debt³. Let's dive into the details.

The 10-Year Statute of Limitations

In most cases, the IRS has 10 years to collect unpaid taxes, interest, and penalties. This period starts from the date the tax is assessed⁴. But what exactly is a tax assessment? A federal tax assessment requires an IRS officer to sign a certificate of assessment, stating what is still owed by the taxpayer⁵. The assessment date is usually when you file your return or when the IRS files a substitute return for you⁴. This 10-year limit is known as the Collection Statute Expiration Date (CSED)⁶. After the CSED, the IRS can no longer legally pursue the debt.

Each tax assessment has its own CSED. Examples of tax assessments include: ⁶

• Original tax amounts you owe when you file your federal tax return
• Additional taxes you owe when you amend your return
• Substitute for return tax balances
• Additional tax the IRS finds that you owe due to an audit
• Civil penalty amounts
• Certain penalties and interest

How to Find Your CSED

You can find your CSED on your IRS account transcript. To get your transcript: ⁶

• Sign in or create your Online Account on the IRS website.
• Complete Form 4506-T, Request for Transcript of Tax Return.
• Call the IRS automated phone number at 800-908-9946.

Once you have your transcript, look under the "Transactions" section. You'll find a 3-digit IRS transaction code with a date below it. This date is generally your CSED, plus any time added by law⁶.

The 3-Year Assessment Statute of Limitations

In addition to the 10-year collection statute, there's also a time limit for the IRS to assess additional taxes. Generally, the IRS has three years from the date your return was due (including extensions) or three years after the IRS received your return (if filed late) to assess additional tax⁷. This is called the Assessment Statute Expiration Date (ASED).

The 6-Year Assessment Statute of Limitations

There's an exception to this 3-year rule. If the IRS suspects you substantially underreported your income (by 25% or more), the assessment period extends to six years from the date you filed your return⁷.

Types of Tax Debts

The 10-year CSED applies to various types of tax debts, including: ⁶

• Income tax you owe when you file your return
• Additional taxes owed due to an amended return
• Tax balances from a substitute for return filed by the IRS
• Taxes owed as a result of an audit
• Civil penalties

Exceptions to the 10-Year Rule

While the 10-year statute of limitations provides a general timeframe, there are some important exceptions:

1. Unfiled Tax Returns

If you haven't filed a tax return, there's no statute of limitations. The IRS can pursue you indefinitely for those unfiled years⁴. This is a crucial point, as it highlights the importance of filing your returns, even if you can't pay the full amount owed.

2. Fraud or Tax Evasion

In cases of fraud or tax evasion, there's no time limit for the IRS to collect⁴. If the IRS can prove fraudulent intent, they can pursue collection regardless of how much time has passed.

Situations That Extend or Suspend the Statute of Limitations

Several actions can "toll" or extend the 10-year collection period. Tolling the statute means the clock is paused, and the time the clock was stopped gets added back to the 10-year timeframe⁸. Here are some situations that can affect the CSED:

• Filing for bankruptcy: The CSED is suspended while the bankruptcy case is pending and for six months after⁴.
• Submitting an Offer in Compromise: This pauses the CSED while the IRS reviews your offer to settle your tax debt for a lower amount. If the IRS rejects your offer, the CSED is suspended for 30 days while you have the option to appeal, and if you appeal, the CSED is suspended during the appeal process⁷.
• Requesting a collection due process hearing: This suspends the CSED while your appeal is being considered⁴.
• Living outside the United States for an extended period: If you live outside the U.S. for six consecutive months or more, the CSED is suspended during that time⁹.
• Signing a waiver to extend the collection period: The IRS might ask you to sign a waiver, extending the CSED, in exchange for granting an installment agreement⁸. If you choose not to sign the waiver, the IRS may assess the tax, and your only recourse would be to pay the tax and then file a claim for a refund¹⁰.

What To Do If the IRS Claims You Owe Taxes From Many Years Ago

If you receive a notice from the IRS about an old tax debt, don't ignore it⁴. It's essential to address tax issues proactively, as this almost always leads to better outcomes⁴. Here's what you can do:

1. Verify the debt: Request a copy of your account transcript to confirm the debt and the CSED. You can do this online or by mail⁶.
2. Understand your options: The IRS offers several payment options, including installment agreements, offers in compromise, and penalty abatement⁴.
3. Seek professional help: If you're unsure how to proceed, consult a tax attorney or a qualified tax professional. They can help you understand your rights and negotiate with the IRS.

IRS Resources for Tax Debt Help

The IRS provides several resources to help taxpayers manage their tax debt:

• Online Account: You can view your balance, set up a payment plan, and access your tax records through your online account on the IRS website¹¹.
• Payment Plans: If you can't pay your tax debt in full, you can apply for a payment plan (installment agreement) to pay it off over time¹¹.
• Offer in Compromise: You can apply for an Offer in Compromise to settle your tax debt for less than the full amount you owe¹¹.
• Taxpayer Advocate Service: This independent organization within the IRS helps taxpayers resolve tax problems and protects your rights¹². You can call them at 877-777-4778.
• Collection Advisory Group: This group provides assistance with complex lien issues, including discharges, subordinations, and withdrawals¹².

Christian Principles and Tax Debt

As Christians, we should strive to be honest and responsible in our financial dealings¹. While the statute of limitations provides a timeframe for tax collection, it's important to remember our moral obligation to pay our taxes. Proverbs 22:7 states, "The rich rules over the poor, and the borrower is the slave of the lender." ¹³ This verse reminds us that debt can lead to financial bondage, and we should strive to avoid it whenever possible.

If you're facing tax debt, remember to:

• Pray for guidance: Seek God's wisdom and direction in dealing with your financial challenges. Proverbs 3:5-6 encourages us to "Trust in the Lord with all your heart, and do not lean on your own understanding. In all your ways acknowledge him, and he will make straight your paths." ¹³
• Seek wise counsel: Talk to trusted Christian friends, mentors, or financial advisors who can offer support and guidance.
• Be honest and transparent: Deal with the IRS with integrity and transparency.

Conclusion

Understanding the statute of limitations for IRS collections is crucial for managing your tax obligations. While the 10-year rule offers some protection, exceptions and extensions can complicate matters. By staying informed, seeking professional help when needed, and applying biblical principles to your finances, you can navigate tax debt with greater confidence and peace of mind.

Remember, as Christians, we are not just accountable to the government but ultimately to God. He calls us to be faithful stewards of all He has entrusted to us, including our finances. If you're struggling with tax debt, seek God's guidance, seek wise counsel (Proverbs 15:22), and be proactive in finding a resolution¹³.

It's also important to note that states have their own collection statutes, which could differ from the federal rules⁹. If you have unpaid state taxes, be sure to research your state's specific laws and timeframes for collection.

Works cited

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9. How Long Can IRS Collect? 10-Year Statute Limits Explained, accessed March 8, 2025, https://damienslaw.com/irs-collection-statute-of-limitations/
10. Extending the Tax Assessment Period - IRS, accessed March 8, 2025, https://www.irs.gov/pub/irs-pdf/p1035.pdf
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12. Understanding a federal tax lien | Internal Revenue Service, accessed March 8, 2025, https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien
13. Bible Verses About Debt To Proactively Grow | Tithe.ly, accessed March 8, 2025, https://get.tithe.ly/blog/bible-verses-about-debt