Ten year statute of limitations and $33,000 tax debt

[iditarod1928]

What is the name of your state (only U.S. law)? Nevada

Hi all,

I am asking this on behalf of my boyfriend (with his permission). He has been in debt to the
IRS most of his working life, due to handling things badly, but has never been charged
with any crime or had any tax lien put on him. He's just had a simple installment agreement
with them all this time.

In his 30's he went about ten years without paying taxes, then started once they noticed.
He was self employed. After that, he paid on it every month, but continued to not file his
taxes. He just waited for them to tell him what he owed them.

Now, 9 years ago his freelancing work morphed into a full time job, and he's been doing it
right for the last nine years - doing his return every year, paying taxes and etc.


Now he is 62, and is being forced into retirement due to having had a stroke last summer.
I started researching about this new partial payment installment plan they have, and then
found out about the ten year statute of limitations.

Most of this $33,000 tax debt is over ten years old - probably 90% percent of it.
He used to owe about $66,000 but has paid off half of it.

So how can he go about applying this ten year statute of limitations to his current
debt? What would the procedure be for doing that?

We would like to do that, and then ask for a partial payment installment plan for
the rest. He is currently paying $800 a month, and that is just not going to be doable
any more.

Would an enrolled agent be able to help with this?

 

[justalayman]

got nothing to add but am interested in the thread and this is the easiest way to chase it.


there are several extremely knowledgeable tax folks that post here. Somebody will have something to say.

 

[LdiJ]

What is the name of your state (only U.S. law)? Nevada

Hi all,

I am asking this on behalf of my boyfriend (with his permission). He has been in debt to the
IRS most of his working life, due to handling things badly, but has never been charged
with any crime or had any tax lien put on him. He's just had a simple installment agreement
with them all this time.

In his 30's he went about ten years without paying taxes, then started once they noticed.
He was self employed. After that, he paid on it every month, but continued to not file his
taxes. He just waited for them to tell him what he owed them.

Now, 9 years ago his freelancing work morphed into a full time job, and he's been doing it
right for the last nine years - doing his return every year, paying taxes and etc.


Now he is 62, and is being forced into retirement due to having had a stroke last summer.
I started researching about this new partial payment installment plan they have, and then
found out about the ten year statute of limitations.

Most of this $33,000 tax debt is over ten years old - probably 90% percent of it.
He used to owe about $66,000 but has paid off half of it.

So how can he go about applying this ten year statute of limitations to his current
debt? What would the procedure be for doing that?

We would like to do that, and then ask for a partial payment installment plan for
the rest. He is currently paying $800 a month, and that is just not going to be doable
any more.

Would an enrolled agent be able to help with this?

If he has been paying on this debt all this time, then that extends the statute of limitations. So that argument is not going to work. Back taxes that old however can be erased in a bankruptcy. He could also try the offer in compromise route, however, if he has any significant assets, he won't get very far with that. An EA could do a very good job assisting him assuming that the EA is experienced in offers in compromise.

Whatever he does, he SHOULD NOT use one of the offer mills that advertises on TV.

 

[davew128]

If he has been paying on this debt all this time, then that extends the statute of limitations.

It most certainly does NOT.

The only things that extend the SOL on collections are BANKRUPTCY FILINGS, OFFER IN COMPROMISE SUBMISSIONS, and voluntary agreements to extend the statute. The SOL started when the tax was assessed or the return filed, whichever came first. Once the ten year mark is hit, the IRS will automatically wipe the tax debt off the books. Nothing more needs to be done.

OP, your BF should contact the IRS and ask for an account transcript for all years with active debts. He should then be able to figure out when the statute expires. If he's paying on debts over 10 years old, he probably didn't file returns on time.

I would also point out that the OIC route is a VERY good solution for somebody with no assets and no income, however if you're close to the SOL, its not worth pursuing.

 

[LdiJ]

It most certainly does NOT.

The only things that extend the SOL on collections are BANKRUPTCY FILINGS, OFFER IN COMPROMISE SUBMISSIONS, and voluntary agreements to extend the statute. The SOL started when the tax was assessed or the return filed, whichever came first. Once the ten year mark is hit, the IRS will automatically wipe the tax debt off the books. Nothing more needs to be done.

OP, your BF should contact the IRS and ask for an account transcript for all years with active debts. He should then be able to figure out when the statute expires. If he's paying on debts over 10 years old, he probably didn't file returns on time.

I would also point out that the OIC route is a VERY good solution for somebody with no assets and no income, however if you're close to the SOL, its not worth pursuing.

Dave, he started out with 66k in debt at a time when installment agreements were only guaranteed at 25k. Until recently, when the amount was increased I have never seen the IRS NOT insist on a voluntary extension of the SOL on amounts that large. They also obviously haven't "wiped out" the remaining debt.

However, if by chance the OP is wrong about how old the debt is, the tax professional that the OP's boyfriend intends to get on board will certainly be able to discern that.

 

[davew128]

Dave, he started out with 66k in debt at a time when installment agreements were only guaranteed at 25k. Until recently, when the amount was increased I have never seen the IRS NOT insist on a voluntary extension of the SOL on amounts that large. They also obviously haven't "wiped out" the remaining debt.

You don't know when the tax was assessed. You also don't know what else has happened. I once saw someone have a tax lien on a nearly 20 year old IRS debt, because they idioticly kept filing BK (not discharging the debt) and failed OICs. To me that the tax debt may or may not be over 10 years is almost assuredly an indicator of that and not a voluntary waiver, because in reality nobody would ever sign one if they had their head screwed on. If the IRS couldn't legitimately collect in an IA before the SOL, it wasn't likely they could forcibly collect through other means in the same time frame.

 

[iditarod1928]

I apologize for not being more clear. I don't believe he owed $66,000 at the time the IRS
first contacted him. That was like 20 years ago. What he owed at time has already been paid off.

I think the $66,000 was the amount of the debt at its height, after he continued to
not file his tax return and take his deductions. He has every letter they ever sent him,
and we are planning to get that info organized into a chart to see the dates when they
informed him he owed more. He also at least has all of his 1099 form from those years
in which he did not file.

So we will have to sit down and figure out exactly when each notice he got
that they increased the debt, goes over the ten year mark. He figures that
it's going to be 90% past the ten year mark. He never signed any kind of waiver
or extension on the SOL, but they are continuing to ask for the monthly payment.
We will also do as davew128 advised, and request those records
from the IRS.

Personally, I would never want to leave it to chance or assumption that he can
just stop paying on it.

The only asset he has is his 401k, which he would do well to keep. Besides that
it's just a bunch of old used stuff in a rented condo, and a very old and very used
car. He really really does not want to declare bankruptcy.

 

[iditarod1928]

You don't know when the tax was assessed. You also don't know what else has happened. I once saw someone have a tax lien on a nearly 20 year old IRS debt, because they idioticly kept filing BK (not discharging the debt) and failed OICs. To me that the tax debt may or may not be over 10 years is almost assuredly an indicator of that and not a voluntary waiver, because in reality nobody would ever sign one if they had their head screwed on. If the IRS couldn't legitimately collect in an IA before the SOL, it wasn't likely they could forcibly collect through other means in the same time frame.

Forgive me, I am not familiar with all the acronyms...what is an IA? And a BK?
He has never tried to do any kind of Offer in compromise or any other approach
because he's been taking a very ostrich head in the sand approach.
(Yes, it's stupid, what can I say...)

He says they never put any kind of tax lien on him, nor have they tried to forcibly
collect. They do send him a payment reminder notice every month.
IMO, it seems they've actually been rather pleasant to him about it.

He says he never signed any waiver of any kind.

 

[LdiJ]

I apologize for not being more clear. I don't believe he owed $66,000 at the time the IRS
first contacted him. That was like 20 years ago. What he owed at time has already been paid off.

I think the $66,000 was the amount of the debt at its height, after he continued to
not file his tax return and take his deductions. He has every letter they ever sent him,
and we are planning to get that info organized into a chart to see the dates when they
informed him he owed more. He also at least has all of his 1099 form from those years
in which he did not file.

So we will have to sit down and figure out exactly when each notice he got
that they increased the debt, goes over the ten year mark. He figures that
it's going to be 90% past the ten year mark. He never signed any kind of waiver
or extension on the SOL, but they are continuing to ask for the monthly payment.
We will also do as davew128 advised, and request those records
from the IRS.

Personally, I would never want to leave it to chance or assumption that he can
just stop paying on it.

The only asset he has is his 401k, which he would do well to keep. Besides that
it's just a bunch of old used stuff in a rented condo, and a very old and very used
car. He really really does not want to declare bankruptcy.

I can understand why he might not want to file bankruptcy, but that would be a sure fire way to erase the IRS debt.

And just for the sake of anyone else reading this thread, letting the IRS determine how much you owe is absolutely the worst thing that you can do, particularly if you are self employed. The IRS is not going to include any expenses in their calculations and everyone has at least some expenses, even if they are minimal.

 

[OHRoadwarrior]

There is no statute of limitations to this fraud unless he stops paying and never files the return. His failing to file a return constitutes the start of the fraud. As long as he keeps paying, they will hold the wolves at bay. Until he files a return or stops paying, the statute of limitations does not begin. His consent to pay is proof of the conspiracy to defraud.

http://www.justice.gov/tax/readingroom/2001ctm/07ctax.htm

 

[iditarod1928]

Thanks for that link, OHRoadwarrior.

7.02[2] Failing to File a Tax Return

Generally, the statute of limitations does not begin to run until the
crime is complete. Toussie v. United States, 397 U.S. 112, 115
(1970). In cases where the defendant has failed to file a tax return, the
statute of limitations begins to run when the return is due. Phillips v.
United States, 843 F.2d 438, 443 (11th Cir. 1988). For example, if a
tax return that was due to be filed on April 15, 1999, was not filed by the
defendant, the statute of limitations on the return would not begin to run
until April 15, 1999.

Looks to me like it says the SOL begins when the return should have been filed.
That would actually be better than having the SOL begin when the assessment
of the debt is made by the IRS.

 

[LdiJ]

There is no statute of limitations to this fraud unless he stops paying and never files the return. His failing to file a return constitutes the start of the fraud. As long as he keeps paying, they will hold the wolves at bay. Until he files a return or stops paying, the statute of limitations does not begin. His consent to pay is proof of the conspiracy to defraud.

http://www.justice.gov/tax/readingroom/2001ctm/07ctax.htm

This guy did not commit fraud or even start to commit fraud. Failure to file a tax return is not automatically fraud under the cite you gave. Also, under failure to file a tax return that cite is very clear that the SOL begins the day the return was due.

 

[OHRoadwarrior]

This guy did not commit fraud or even start to commit fraud. Failure to file a tax return is not automatically fraud under the cite you gave. Also, under failure to file a tax return that cite is very clear that the SOL begins the day the return was due.

Affirming the debt is proof. Read the link I provided. He failed to file a return, then agreed he owed them money by paying their judgment. Don't talk to me, I do not make the laws. Talk to the government.

 

[davew128]

There is no statute of limitations to this fraud unless he stops paying and never files the return. His failing to file a return constitutes the start of the fraud. As long as he keeps paying, they will hold the wolves at bay. Until he files a return or stops paying, the statute of limitations does not begin. His consent to pay is proof of the conspiracy to defraud.

http://www.justice.gov/tax/readingroom/2001ctm/07ctax.htm

Please keep your incorrect information to yourself. The SOL you refer has NOTHING to do with the issue at hand. Thank you for remaining silent.

 

[davew128]

Affirming the debt is proof. Read the link I provided. He failed to file a return, then agreed he owed them money by paying their judgment. Don't talk to me, I do not make the laws. Talk to the government.

Fine, then talk to ME. I USE those laws. The SOL for claiming a refund has NOTHING to do with the SOL for collecting on assessed tax, except for monies paid within the last two years if an actual return is filed.

Beyond that, please do us a favor and invoke your right to remain silent.