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10+ year IRS balance


ILLMAS

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How easily would it be to inquire about a 10+ year outstanding balance with the IRS?  Last time I prepared TP return was in 2005 or 2006 and there was a balance that never was paid, TP would now like to pay it with all the accumulated penalties and interest, should I call the tax practitioner line or the collections department directly?

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I had a client come in this year with the same situation, I suggested she make an appointment to go to IRS office and when she did they pulled her record for her and told her that it had been cleared off, and that she owed them nothing.

California on the other hand was not quite so forgiving.  She did provide her with info needed and we filed the returns they requested and are now working with her on a payment plan.

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The IRS has 10 years to collect any debt from tax payers when returns are filed.  I have heard some  tax attorneys to suggest to people not to make payments when 10 years are around the corner because after 10 years the statue of limitations kicks in and the debt is gone.

So if your client will receive a huge refund this year and the statue of limitations for a debt will expire in August, since you are busy, you will put them on extension and file in October, correct?

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On 5/3/2017 at 9:48 AM, ILLMAS said:

How easily would it be to inquire about a 10+ year outstanding balance with the IRS?  Last time I prepared TP return was in 2005 or 2006 and there was a balance that never was paid, TP would now like to pay it with all the accumulated penalties and interest, should I call the tax practitioner line or the collections department directly?

You definitely will want to call the PPL and get copies of the Account Transcripts.  Of course you will need form 2848, or 8821 and the number of transcripts are limited to 10 on any phone call.  You can also get the transcripts on line once the 2848 has posted (about 5 days).  

PPL can provide the amount due for each year and the total amount due. If you need to know the expiration date for any year (CSED), PPL can provide that, too.

BTW, if your 2848/8821 form is not on file when you call PPL, it can be faxed to them while they wait on the other end. I would then request that the form be forwarded to the CAF unit, so you don't have to fax it a second time.

 

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4 hours ago, Catherine said:

Then why do mine always, *always*, *ALWAYS* take two or three weeks?  Just sayin'... it's like my POA's all have "DELAY ME!" notes on them.  Sheesh.

Are you faxing them of mailing them?  Yeh! At certain times of the year it may take a little longer, but I doubt if any took more than 10 days faxed, (have never mailed them).

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15 hours ago, Max W said:

Are you faxing them of mailing them?

Faxed.  Always.  And they always say "2-3 days to get in the system" and it has never taken less than two weeks.  Usually much longer.  And sometimes I have to submit two or three times before they get through.  Three different fax machines from two different locations over the course of a decade - the one consistent thread is how LONG it takes to get them put in.

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On 5/4/2017 at 2:10 PM, Catherine said:

Then why do mine always, *always*, *ALWAYS* take two or three weeks?  Just sayin'... it's like my POA's all have "DELAY ME!" notes on them.  Sheesh.

That's always a bizarre issue. In training I was told to call and check on it after a week. Every time I call the IRS acts like they are shocked I'd call so soon - every time it's in the system. It's a very weird system - no clue how it works.

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On ‎5‎/‎4‎/‎2017 at 11:41 AM, Pacun said:

The IRS has 10 years to collect any debt from tax payers when returns are filed.  I have heard some  tax attorneys to suggest to people not to make payments when 10 years are around the corner because after 10 years the statue of limitations kicks in and the debt is gone.

So if your client will receive a huge refund this year and the statue of limitations for a debt will expire in August, since you are busy, you will put them on extension and file in October, correct?

Pacun not sure I agree. Once the IRS has started the collection process I don't believe the debt ever just disappears. The IRS has 7 years from the date of the filing of the return or when the return should have been filed to collect on a debt. I too had a client that had 10 years of back debt and was in the collection process. The IRS also prepared returns for this guy and the clock began to run when they prepared the returns. The only way that I am aware of to make a tax debt go away, but not in its entirety, is to file an offer in compromise. What you might be saying is if the IRS has not started the collection process in 10 years then don't attempt to pay anything on it if the expiration is around the corner. Just wondering.

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No. the client needs to file, not the IRS for the clock to start running. Also, the IRS will ask clients to extend the statue of limitations by having the client sign a form. The IRS knows the rule and therefor suggest the clients to sign the extension.

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6 hours ago, Terry D said:

Pacun not sure I agree. Once the IRS has started the collection process I don't believe the debt ever just disappears. The IRS has 7 years from the date of the filing of the return or when the return should have been filed to collect on a debt. I too had a client that had 10 years of back debt and was in the collection process. The IRS also prepared returns for this guy and the clock began to run when they prepared the returns. The only way that I am aware of to make a tax debt go away, but not in its entirety, is to file an offer in compromise. What you might be saying is if the IRS has not started the collection process in 10 years then don't attempt to pay anything on it if the expiration is around the corner. Just wondering.

Terry, the debt does disappear after 10 years, not after the date of filing, but after the date of assessment. Ten years is the length of time after the last assessment for the CSED (Collection Statute Exp. Date) to run.  This can be extended (tolled) for a number of reasons.  The most common are bankruptcy filing, audit assessments, installment agreements and OIC's.  In the last two, it is the time between application and acceptance that is extended.

In the case where a particular year is ready to expire, there should be no reason  pay on it, but other years can be paid. Specific instructions should be made with the payment to direct to the year you choose so that it is not paid on the expiring year.

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3 hours ago, Pacun said:

No. the client needs to file, not the IRS for the clock to start running. Also, the IRS will ask clients to extend the statue of limitations by having the client sign a form. The IRS knows the rule and therefor suggest the clients to sign the extension.

The clock starts running from the last date of assessment (think audit). It doesn't matter who files the return.

With IRS substitute for returns, the process may not start for 4 or 5 years, thus extending the statute.

The collection extension (5 year waiver) you allude to has not existed for many years.

 

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Thanks Max for the clarification. I am working with a client who filed 2006 & 2007 very late, the IRS had already assessed. We amended and corrected the tax due for both years as a result of the IRS not having all of the information for the return. It is now 2017 and the IRS is still actively seeking collections. So, again, the idea the debt disappears in this case is incorrect. As you say, the statute clock begins with the assessment. I was unclear in my post as to the start dates. I would hope no one would think if you ignore the tax for ten years it vanishes.

>>>>>>In the case where a particular year is ready to expire, there should be no reason  pay on it, but other years can be paid<<<<<<<< I agree totally here.

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