Why Decades-Old Tax Debt Can Still Haunt You

According to their statute of limitations, the IRS has 3 years to assess your tax returns and payments. This can be extended up to 6 years or more for grave delinquencies, such as if you have more than 25% of missing income. Then, they have 10 years to collect your debt.

What you have to realize is that you’re not always off the hook when the 3, 6, or 10-year limits have passed. There are several exceptions, especially if the IRS suspects intentional tax evasion. A thin line separates creative tax planning and tax-related crimes, so be wary not to cross it.

The Downside of Being a “Responsible Person”

Some taxpayers can get vindication if they have the proper documentations and if the agency was really found to have made errors in terms of the time-sensitive rules. However, in many cases, the IRS rules and rights are pretty clear, so the taxpayer ends up with a huge bill.

For instance, in a recent case, a company’s officers failed to fork over their payroll taxes about three decades ago. Since they were identified as responsible persons and the tax code was in favor of the IRS, they now owe the federal agency about $74,000.

When Your Old Tax Debt Is Too Big

If you do end up owing a huge amount with virtually no means to afford it, explore the option of an offer in compromise to settle the debt for less. A tax attorney can help you navigate the application.

 

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