by Jay Freeborne , Enrolled Agent
February 20, 2018

If you file a tax return and you have an unpaid tax debt, you are essentially starting a 10 year or 120 month statute of limitations clock. Your 2018 tax return, if filed on time, will get processed by the IRS in May 2019 which starts the clock. If you didn't pay your tax debt, it will expire in May 2029, ten years from May 2019.

Now it's highly likely that the IRS will pursue you for your unpaid taxes before it expires. But there could be dead spaces in those ten years where they do not. As you try to deal with your tax debt, your actions can extend your expiration dates.

What extends your expiration dates?

Filing an Offer in Compromise unsuccessfully will freeze the clock for the duration of it's processing plus 30 days.

Filing Bankruptcy will freeze the clock for it's duration plus a six month penalty.

Proposing an Installment agreement will freeze the clock UNTIL it is approved.

Defaulting an installment agreement will extend the clock by 30 days.

Why is the expiration date is so important?

Your debt expires! Nothing needs to be done if your tax debts expires and that's as good as it gets in our business. Any good tax problem resolver needs to find out, first, when your expiration dates are. Because they don't want to tamper with them. As expressed above, filing an Offer can extend the statute and you don't to make that mistake if your debts are going to expire (or just as importantly if you are NOT going to qualify for an Offer).

Your expiration date is key to calculating your Offer in Compromise. If you want to see if you qualify for an Offer, first, see if you are able to pay back what you owe at your current income before your debt expires. For example, if your $50,000 tax debt expires in 30 months, you will need to pay $1666 a month to pay that off ($50,000/30 = $1666). If your "disposable income" is less than $1666 then you might meet the Offer criteria! (Second question will be "do you have the assets to pay $50,000?")

WATAX starts all cases by researching your IRS record and finding out your expiration dates. Do you have a tax problem that you need guidance on? Email us a description of your tax issue or Call us at 1-888-282-4697 and we'll help you solve it!

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