In our previous post, we took note of a 10-year limitation period for the IRS to collect back taxes. But when does the clock begin ticking on that ten-year tax debt collection period? And, as with tax audits, are there exceptions that can extend it?
Ticking – and tolling – of the clock
Generally the 10-year clock that limits IRS collection actions begins to tick when the taxes are assessed. This 10-year rule has been part of the Internal Revenue Code since 1990. An assessment means the taxes are officially imposed and billed.
There are, however, exceptions to the general 10-year limitation rule that can extend (“toll”) the limit. For example, in a 2013 case, the U.S. Tax Court ruled the IRS could go all the way back to an assessment made in 1985 to collect the Trust Fund Recovery Penalty from a responsible individual.
The individual was an officer and director of a company the government contended had not met its payroll tax obligations. The case, called Beeler v. Commissioner, was the subject of protracted litigation over whether certain individuals had willfully failed to pay over withheld taxes.
Trust Fund Recovery Penalty
In Beeler, the Tax Court allowed the collection action to continue long after the 10-year period after assessment had ended. The court reasoned this was permissible because the legal action to collect had begun within the 10-year window.
To be sure, going back such a long period – nearly 30 years – is highly unusual. But the Beeler case highlights the fact that the IRS seems determined to be tough on collections when employment taxes and Trust Fund penalties are at issue.
If your business is struggling to stay in compliance with payroll taxes, it therefore makes sense to discuss your situation with a knowledgeable attorney.
Other tax collection issues
You may also have other issues on your mind, apart from Trust fund penalties.
Perhaps you’ve heard that the statute of limitations doesn’t run out for civil tax fraud and that the IRS could come after you even after the 10-year collections period has run out.
In practice, the IRS would face many practical problems of proof in trying to pursue such an old case. But it’s also important not to compound your own problems, such as by making untruthful statements on Form 433-A, the information statement for collections.
Regardless of your exact circumstances, a knowledgeable tax controversy attorney at Robert J. Fedor, Esq., L.L.C. can guide you effectively in responding to collection actions by the IRS and other revenue agencies.
