I am often asked how long the IRS can come after a person for their deliquent taxes. When answering I always have a question to ask them – have you filed all of your tax returns? Why? Because in order for the collection statute of limitations to begin running against the IRS, the taxes have to be assessed against the taxpayer. In order to expedite the assessment of the taxes, you have to file the tax returns. So in general, if you file your tax returns on time every year, they will be assessed on April 15 of that filing year.
The IRS collection statute of limitations is ten years. After the ten years runs out, the IRS cannot levy, garnish, lien or otherwise collect the tax owed against you because, simply, it is no longer owed.
There are some situations that extend this period of time to collect. Some of those include filing bankruptcy, an offer in compromise or a collection due process hearing request.
So, no matter whether you can pay your taxes each year or not, you should definitely file your tax returns on time each year. This does several things for you. First, as we have just discussed it starts the clock running on the collection statute of limitations, and second it prevents non-filing penalties assessed by the IRS. This was discussed in an earlier post. This will at least save you some money – because we know that the IRS is going to bombard you with penalties and interest on your unpaid liabilities.