Individual or 1040 tax liabilities expire ten years after they are assessed. The ten year statute-of-limitations is why it is an important FIRST STEP for your tax professional to research your account with the IRS before doing anything else. Your taxes might very well expire and no action is necessary.
We came across a person in Mississippi who hired a "professional" to handle his case. The professional very competently prepared his paperwork for an Offer in Compromise - OIC. However, once the case had processed with the IRS, the client couldn't afford the $40,000 OIC that the IRS approved on his $100,000 of debt. But while not being able to do the OIC was bad news, even worse is by filing this OIC the professionally unnecessarily extended the client's expiration date on his taxes. Had the professional truly known what he was doing, he would have determined that the old taxes due: 1995, 1996 and 1997 were all slated to expire in May 2009! By filing the Offer and failing, he added nine months to that expiration date. (The law states that the expiration date is extended by the amount of time it takes to investigate the Offer.) So, instead of expiring in May 2009, as they should have, they wouldn't expire until February of 2010 -- all due to an incompetent "professional" not researching the client's record first.
We later the learned that this "professional" did NOT have a license to practice before the IRS. In other words, he was NOT: 1. an Enrolled Agent (like us) 2. a C.P.A. or 3. an attorney.
Here are the basic rules we give people who are shopping around for someone to handle their tax case:
1. Look for an A + BBB rated company with at least 15 years of experience assisting tax problem customers.
2. Make sure that the tax professional is LICENSED to practice.
3. Don't fall for pressure. Your representative should NOT strong-arm or scare you into hiring them.
