The IRS Installment Agreement Statute of Limitations: What You Need to Know
If you owe money to the IRS, entering into an installment agreement can be a viable option to repay your debt over time. However, before you agree to any terms, it`s important to understand the IRS installment agreement statute of limitations.
The statute of limitations refers to the time period in which the IRS can collect your debt. In general, the IRS has ten years from the date you filed your tax return to collect the debt. However, this timeline can be extended if certain circumstances apply.
When you enter into an installment agreement with the IRS, the statute of limitations is paused until the agreement is satisfied. This means that the ten-year clock stops ticking while you make payments under the agreement.
It`s important to note that the statute of limitations can be extended by the IRS if you default on your installment agreement. If you default, the IRS can file a federal tax lien against you, and the statute of limitations is extended for the period of time that the lien is in effect. The length of time that a federal tax lien is in effect can vary depending on your situation.
Another important factor to consider is that the statute of limitations can also be extended by bankruptcy. If you file for bankruptcy, the IRS is prohibited from taking collection action against you while the bankruptcy case is pending. However, once the bankruptcy is discharged, the IRS can resume collection action and the statute of limitations starts again from the date of discharge.
In general, entering into an installment agreement with the IRS can be a good option if you cannot pay your tax debt in full. However, it`s important to carefully consider the terms of the agreement and the potential implications on the statute of limitations.
If you`re unsure about the statute of limitations or have questions about installment agreements with the IRS, it`s always a good idea to consult with a tax professional. They can help you understand your options and make an informed decision about how to proceed.