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The Statute of Limitations on IRS debt is ten years from assessment

of tax liability. However...
The Statute of Limitations on IRS debt is ten years from assessment of tax liability. However, the IRS can reduce the debt to a judgement just before the end of the ten years, thus extending the liability considerably. In the State of Florida, disability insurance benefits are exempt from any form of collection, by Florida statute. The only exception is the IRS. The IRS can attach up to 100% of disability payments. Here is the question: If the IRS gets a judgement, and the ten year statute expires, is that judgement then a plain old "protected" judgement, or is is still an IRS debt that can attach the disability benefits? In fact, while I know there is case law affirming the right of the IRS to attach disability, there may in fact be no case law on this specific subject. As a lay person I do not know how to look it up, or I wouldn't be bothering you.

Thanks in advance
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Answered in 40 minutes by:
11/20/2012
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
The statute of limitation on collection is set by the federal law and may not be overridden by the court order - thus the judgment, may not change the statute.


The date the collection statute expires is the Collection Statute Expiration Date (CSED) and may not be changed by any court.


Also the law specifies under which events - the Collection Statute can be tolled (means - extended):


- filing of a bankruptcy protection
- filing of an Offer in Compromise
- filing of requests for relief
- signing of a waiver extending the statute
- taxpayer is out of IRS jurisdiction (for instance - in a foreign country.
Here is the reference - http://www.law.cornell.edu/uscode/text/26/6502
However - if the IRS gets a judgment and based on that judgment issues a levy against any property - the statute of limitation on collection do not apply to the levy.
So - potentially - the IRS may issue levy based on the court order and attach it to your income. However I never see that IRS is doing that.


See in the statute:


If a timely proceeding in court for the collection of a tax is commenced, the period during which such tax may be collected by levy shall be extended and shall not expire until the liability for the tax (or a judgment against the taxpayer arising from such liability) is satisfied or becomes unenforceable.

Customer:

I'm sorry, maybe I was not clear in my question, because your response, while related, is not to my question.

Customer:

Here is my question:

Customer:

My income comes from a disability insurance policy. The Florida statutes specifically exempt any collection, including judgements, on disability payments. The ONLY exception is IRS debt. I know for certain that during the ten years until the statute runs they can attach the money, if they know where it is. Specifically, AFTER the statute has expired, and assuming the IRS got a judgement before the expiration, is that judgement exempt from collection just like any other judgement, or is it EXEMPTED FROM THE EXEMPTION because the underlying debt was to the IRS. This question has nothing to do with court orders, or tolling, or offers or anything else. Just specifically can IRS judgements AFTER EXPIRATION OF THE STATUTE be enforced when no other judgement of any kind can?

Customer:

Thank you.

Customer:

I know the statute does not apply to any levy, but the question is CAN the IRS levy when JUDGEMENTS are exempt. In other words, does the expiration of the statute reduce the judgement to a general debt, which is uncollectable against disability, or is it still an IRS debt and therefore collectable? I'm sorry, but I will not be able to explain it any better. Thank you.

LEV :

This still will be federal tax debt - which has higher priority compare to any regular judgment.
That will be a federal tax levy which may not be limited by any state law.

LEV :

Legally - the IRS may levy on your income before the statute of limitation on collection runs out and such levy would not be limited by section 6502. However - as I mentioned - the IRS rare uses such option.

Customer:

So if the IRS has the power to convert to a judgement which will live for ten or twenty years, or maybe even be renewable forever, what is the purpose of the Statute of Limitations? Also, if somebody owes them a substantial amount of money when the statute expires why WOULDN'T they just file for judgement to protect their interest forever? In my particular case, I have a large income for life, but they have just forgotten about me - but could "remember" at any time.

Customer:

I think I just sent this, but I don't see that it went so I'll send it again.

Customer:

I just sent a response, but it doesn't show up, so here it is again:

Customer:

Okay, sorry, I see what happened.

Customer:

Last question:

Customer:

If the statute DOES expire, can they still file for and get a judgement AFTER the expiration? My problem is that I have four years to go (or thought I did), and legally they only have to leave me 2888 per month where I live. My rent alone is 3800 per month, so you see my problem. Until yesterday I thought I only had to hold my breath for another four years and change, but now I can't sleep. I would LOVE to make them an offer, take 10k a month, as opposed to taking nothing, so at least they get half a million ( I owe about a million), but to do that I have to reveal myself. Anyway, the fault is mine, whining or complaining, just trying to completely understand. Looks now like I really have no way out.

Customer:

that was NO whining or complaining. Typo. Sorry.

LEV :

While the judgment (or the court order) might have the statute of limitation - that is not a question.
The federal law allows the IRS to issue the levy WITHIN the statute of limitation and based on the court order and the period during which such tax may be collected by levy shall be extended.
This levy if timely filed - extends the statute of limitation.


Again – that is regulated by the federal law – and may not be overridden by the state law of by the state court.

Customer:

So the botXXXXX XXXXXne here is that in reality, and assuming the IRS wants to use all their options, the statute means nothing, they can collect literally forever as far as the length of my life is concerned, right?

LEV :

However - after the statute of limitation runs out - the tax debt becomes unenforceable - and IRS may not file the levy even based on the court order.

Customer:

So then as long as they file BEFORE the ten years, I'm off the hook? So all I have to do is:1, pray they don't pick up my file again for four years, and the pray again they won't bother to take the ten minutes it takes to file for a judgement if they do. Thanks for your answers. I will leave a gratuity.

Customer:

Sorry again, that should have said "as long as they DON'T file before the ten years I'm off the hook. As you can tell I'm very upset since learning of this judgement possibility yesterday. Thanks again.

Customer:

Is there any way for somebody to contact the IRS on my behalf WITHOUT telling them who I am, just stating the facts: For six years you have gotten nothing. This guy wants to pay you half a million over the next four years, as opposed to you getting nothing by virtue of inaction, but he's afraid if he opens this can of worms you'll take the maximum and then he's literally dead? Can that be done, making a deal BEFORE exposure?

LEV :

Your understanding is correct. The actual effect of the statute of limitation is based on specific circumstances. If the taxpayer has no assets - there is nothing to attach the levy - and the tax debt will become unenforceable after the statute runs out.
However - if the taxpayer has valuable assets or income stream - the federal laws allows the IRS to attach levy on such assets - limiting the taxpayer's ability to keep assets and avoid tax liability.

Customer:

I do not want to make an offer in compromise because I don't want to officially reveal myself.

Customer:

And since they have the power to take almost 20k a month every month, consideirng my income, why would they even consider a 10k offer? So my only bargaining chip is making the offer BEFORE telling them who I am. As I read all this, I realize how badly I'm screwed here. They CAN keep me holding my breath for the rest of my life. I did a good job of killing myself here.

LEV :

You (or your representative) may contact the IRS with a general tax questions without identifying yourself specifically.
However - if you want to consider your specific circumstances – that seems based on your information - the only way the IRS would consider your situation - filing OIC. Otherwise - you will get a generic answer kind-of “that is possible” - without any obligations.

Customer:

Thank you for all this effort. I will do the right thing by you. Can I ask one more very quick thing?

Customer:

"However - after the statute of limitation runs out - the tax debt becomes unenforceable - and IRS may not file the levy even based on the court order." This is an exact quote of something you wrote above. I am confused by the language EVEN BASED ON THE COURT ORDER. BotXXXXX XXXXXne here, just YES or NO, if they obtain a judgement (which is different than a levy), and DO levy against me before the ten years, that levy WILL or WILL NOT continue after the statute expires? That is my last question.

LEV :

If the IRS obtains a judgment and file a levy based on that judgment before the statute of limitation runs out - according to the section 6502 - the period during which such tax may be collected by levy shall be extended. Thus - the levy if timely filed - extends the statute of limitation.
The statute of limitation WILL NOT expire in this situation.

Lev
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Customer reply replied 4 years ago
Hi again. ++..


































Hello again. Just one quick last question.

Just pulled my credit report. I have a Federal tax lien for about 250,000 filed in 2005. The statute for that year runs out in 2015.

According to one of your previous answers, I understand that if they actually levy before that date they can just keep collecting after the statute runs. (If I'm wrong, please tell me so).

Here is the new question: If they do not levy, does that lien become uncollectable when the statute runs?

Thanks










The issue is that your statement "The statute for that year runs out in 2015" is not technically correct.

The statute of limitation would run out in 2015 is there will not be any levy at that time.

In case of levy - the statute of limitation shall be extended and shall not expire until the liability for the tax (or a judgment against the taxpayer arising from such liability) is satisfied or becomes unenforceable.

 

You have a Federal tax lien - that is a different issue. A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your tax debt. A levy actually takes the property to pay the tax debt. That is a huge difference.

The Federal tax lien doesn't affect the statute of limitation and as soon as the statute of limitation runs out - the lien becomes unenforceable.

Following publications might be helpful:

  • Pub. 1450, Request for Release of Federal Tax Lien
  • Pub. 1468, Guidelines for Notice of Federal Tax Liens
  • http://www.irs.gov/irm/part5/irm_05-017-002.html
  • Lev
    Lev, Tax Advisor
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    Customer reply replied 4 years ago
    Thank you very much. So far there is no levy against my income, only a tax lien. My total debt expires in Nov of 2015, and a very minor and insignificant amount in 2017. So I have about 35 months to hold my breath. It's over a million dollars, mostly penalties and interest. Ironically, I am willing to pay them at least a half a million, but in order to do that I have to tell them who I am, and then they will see that I could pay the entire million over time, so why should they settle for only half. I'm trying to find a way to negotiate with them based on the true numbers, getting a guarantee of a deal before I tell them who I am. Way back when, I tried to give them a paid up life insurance policy for at least two million dollars, and they wouldn't take that. So I know they are very rigid in their parameters. However, since they have forgotten about me for seven years I think it would behoove them to just take a half a mil and be glad they got it, but my opinion doesn't matter, of course.

    I'll give you an excellent, and that's it for me.

    When dealing with the government and such large and bureaucratic organization as the IRS - you may not set your own rules - and should follow their rules and regulations - thus you will not get any guarantee of a deal before the full disclosure.

    Moreover - any deal you might get without full disclosure could be canceled if they learn you do not disclosure all required information.

    Because of the large amount on stake - I strongly suggest to discuss your issues with a tax attorney in your state.

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