- How to Look Up a Federal Tax Lien
- Does an IRS Lien Take Precedence Over a Mortgage?
- Do IRS Liens Have Priority Liens Over Mortgages?
- Can House Repairs Be Taken Off Income Tax if Insurance Paid for It?
- Can I Claim a Rent Deduction for an Elderly Parent in a Home I Own?
- IRS Income Tax Underpayment Penalty
The IRS is subject to limitations on its ability to asses back taxes against you, to place a lien on your property or to collect these taxes by, for example, auctioning your property. In addition, you may be eligible to discharge certain types of tax debt in chapter 7 bankruptcy or by seeking voluntary forbearance from the IRS.
The IRS is subject to a statute of limitations of three years to make an assessment of your tax liability that differs from your own assessment. Since this means three years from the date you actually file your tax return, not three years from the date your tax return comes due, you can't simply "forget" to file your tax return and wait for the statute of limitations to expire. This limitation extends to six years if you omit gross income from your tax return that exceeds 25 percent of the amount stated in your tax return. There is no statute of limitations if you file a fraudulent tax return.
Collection and Levy
The IRS levies your property when it attaches a lien to it. Although this does not transfer title of your property to the IRS, it can make it difficult to sell your property or borrow money against it. The IRS collects when it actually seizes your property by, for example, garnishing your paycheck or auctioning your home. The IRS must take collection action within 10 years after the date that it sends you the first tax bill for a particular debt. If it doesn't, any lien on your property expires and your tax debt expires.
Chapter 7 Bankruptcy
To discharge taxes in chapter 7 bankruptcy, your tax debt must be at least three years old; the IRS must have assessed the tax, if at all, at least 240 days before you filed for bankruptcy; you must not have committed fraud or tax evasion with respect to the debt for which you are seeking discharge; you must have filed a tax return for the tax debt you are seeking to discharge at least two years before you filed for bankruptcy. You can only discharge income taxes, not other types of assessments, such as fraud penalties or payroll taxes. If the IRS has already levied on your property, the bankruptcy court cannot remove it, even if it grants a discharge of the underlying tax debt.
Offers in Compromise
When the IRS grants an offer in compromise, it agrees to allow you to pay less than the tax debt it assessed against you. It may do this if there is doubt as to whether you legitimately owe the tax, if it concludes that you will never be able to pay the debt or if paying the tax would subject you or your dependent to extreme hardship. You may seek an offer in compromise with the IRS by filing Form 433-A if you are an individual or Form 433-B if you are a business. You must also file documentation.
- LawFirms.com: IRS Statute of Limitations for Tax Debts
- IRS Tax Attorney: IRS Tax Attorney: Time Limitations to Prevent the IRS from Collecting Tax and Levy
- Nolo: Eliminating Tax Debts in Bankruptcy
- Internal Revenue Service: Offer in Compromise
- IRS Tax Attorney: Offer in Compromise Information and Guidance