If you've got an IRS letter on your desk right now, you have a decision to make, and the clock matters. I'm Darrin Mish. I've spent 32 years helping people with exactly this kind of situation. Here's what you should do.<\/p>\n
Generally, the IRS has ten years from the date tax is assessed to collect the unpaid liability. Once a statutory expiration date is reached, the IRS must then abate the tax and release any liens filed against the taxpayer’s property<\/a>. This action is rarely automatic. \u00a0Click here to read or watch more IRS Help resources.<\/a><\/p>\n Frequently the IRS will continue collection activity after a statute has expired, either out of administrative backlog or a perception of taxpayer ignorance. An important taxpayer \u201ctip\u201d in handling any outstanding tax liability that spans multiple tax years, is to designate any voluntary payments to the most recent assessments.The reason being that these assessments have the longest statutory time frame subject to collection activity. Earlier assessments have shorter statutory time periods. If a taxpayer does not make a designation of a voluntary payment, the IRS will always apply the payment to the tax period with the shortest time remaining under collection statutes. This is in the best interest of the<\/p>\n The reason being that these assessments have the longest statutory time frame subject to collection activity. Earlier assessments have shorter statutory time periods. If a taxpayer does not make a designation of a voluntary payment, the IRS will always apply the payment to the tax period with the shortest time remaining under collection statutes. This is in the best interest of the government, not the taxpayer. Frequently the IRS will apply voluntary payments this way out of default regardless of any taxpayer designation. It\u2019s important to document any designation clearly on the payment.<\/p>\n However, there are some actions that can \u201ctoll\u201d or stop this ten year period from running, thereby extending the time the IRS has to collect any unpaid liability. The most common actions that extend the statutory collection period are: a pending bankruptcy, a judgment or litigation in tax court, a collection due process appeal, a pending offer in compromise<\/a>, any time the taxpayer resides outside the U.S. and when the taxpayer voluntarily signs a waiver extending the collection statute<\/p>\n Other less common actions pertain to military deferments, tax assistance orders and estate tax liens. Because each taxpayer\u2019s situation is unique and may possess its own complexities, it\u2019s important for the taxpayer to not assume that a tax liability has expired just because ten years has passed. Professional assistance is important.<\/p>\n