Have a Tax Question? Ask a Tax Expert
You basically have a couple of options open to you.
The first is to try submitting an Offer in Compromise (OIC) to try and settle the tax debt for a lower amount than what you actually owe. An OIC basically involves submitting paperwork with complete financial disclosure of all your current assets and income. The IRS will also take in to consideration your future years' earnings potential. If after reviewing the situation it seems unlikely to them that you would ever be able to pay off this debt in full in the allowed 10 years that they have to collect the debt, then they may agree to settle the debt for a lower amount. The paper work involved in submitting an OIC is extensive and it is advisable to use the services of a tax consultant or Enrolled Agent who is familiar with this process.
Your other option is to apply for an installment payment plan so that you could make regular payments on your account. With a payment plan, interest would continue to accrue on the outstanding balance, but as long as you stayed current with your payments it would keep the IRS from placing any liens or levies on your assets.
Below are links to sections of the IRS website with more information on both the OIC and the payment plans.
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Thank you cpc
Hello again cpc,
The IRS has a 10 year statute of limitations in which time they can continue to collect a tax debt. The 10 year statute starts on the day that the tax was finally assessed. So as an example, if you filed taxes for the year 2003 and an audit was conducted 2 years later in 2005 and they finally assessed additional taxes for that year in 2006, then 2006 is when the statute starts. It does not go back to the 2003 date.
Once 10 years has passed the IRS can no longer legally pursue collection of that particular tax debt and the debt is basically written off.
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After 10 years has passed, the tax lien expires. Tax liens are generally self releasing after 10 years.
I am not sure what you are referring to when you say that "you said they can extend it"?
Where did I say that?
The only time that the IRS can extend the 10 year statute is if the taxpayer is willing to extend it, which is not likely to happen in most cases.