There are a lot of penalties when it comes to taxes. You could get penalties for not paying on time, and you can also get them for not even filing your taxes.
The penalty for not paying and filing your taxes differ depending on the situation. What makes the punishment for not paying and filing taxes different is the severity of the case.
For instance, if you are a day (or few days) late when it comes to paying your taxes you may just get a note of warning from the IRS. On the other hand, having a huge tax debt or not paying for years can actually land you in jail. Then there’s a lot of ground in between those two.
But what happens to you if you have not paid your taxes for over 10 years? Does the IRS forgive tax debt after 10 years? Or will you still be on the hook until you pay up? Here’s the answer…
Does The IRS Forgive Tax Debt After 10 Years?
This answer might come as a surprise, but yes, the IRS forgives tax debt once it reaches the 10 year mark. The IRS has a 10-year period of statute of limitations.
And that is thanks to the 1998 IRS Reform and Restructuring Act. Under the IRC § 6502, the IRS only has 10 years to collect back taxes from the date of assessment.
After 10 years, the IRS will no longer try and collect any tax debts. However, if you are trying to escape your taxes, or are planning to, let me tell you this, it will not be easy and it is VERY risky.
The closer you get to that 10-year period, also known as the Collection Statute Expiration Date (CSED) , the more aggressive the IRS becomes in attempting to collect your taxes.
Notice Of Deficiency
Another thing is that once you receive a Notice of Deficiency and you have failed to pay for it, the IRS will start its collection process.
A Notice of Deficiency is a bill for your large debt with the IRS. The date of your tax assessment is the same as the one on the one found in the Notice of Deficiency, and it is the date on which the IRS learned about your debt.
Not Filing At All Won’t Help You
Not filing your taxes will not help you either. If you do not file your taxes to avoid the IRS discovering your debt, they will use existing information to file a substitute return in your name.
This existing information may come from previous tax returns and info from employers. Each month you fail to pay your taxes, your debt, interests and penalties rise.
How The IRS Can Still Collect Tax Debt After 10 Years
These penalties may turn into a federal tax lien or a levy on your accounts, wages, and properties. However, the CSED may extend more than 10 years for you.
The clock of your CSED may be extended for the following reasons:
- Filing of bankruptcy
- Filing of Offer in Compromise
- Filing of Appeal
- Filing a lawsuit against the IRS
- Being out of the country for at least 6 months
- Signing a waiver to extend the CSED
- Military deferments