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Dear Tax Talk,
My husband owes back taxes from tax years 2000, 2001, 2002 and 2003. We hired an attorney and were told that there were no funds left for repayment after monthly bills, and that since there was nothing the IRS could collect then they would wait for him to work so they could go after wages. He is unemployed and nothing we own is in his name. We were told to wait out the statute of limitations. I am not sure how long that is. Could you tell us when we will have out-waited the statute of limitations on the tax years listed above? This cost us $600 for a lawyer to tell us this.
I guess these years were before you were married and that’s why you’re not on the hook with your husband. I can’t see why the attorney would have not given you a date that the statute of limitation on collection expires.
The general rule is that the Internal Revenue Service, or IRS, has 10 years from the date the tax is assessed to collect any unpaid balance, including the applicable penalties and interest that continue to accrue. The date of assessment can be found by asking the IRS for transcripts of his accounts for each year that he owes. Either go to an IRS office to request the transcript or mail in a completed Form 4506-T. There is no charge for this request.
If these tax returns were timely filed, the 2000 tax would have been assessed on or about April 15, 2001. The statute to collect would expire on the same date in 2011. If the return was filed late, then the statute would be open longer.
If your husband returns to work, the IRS could garnish his wages through the time that the statute is open. If he doesn’t have the money to pay current bills, much less the IRS, he may want to consider filing an offer in compromise, or OIC, to dismiss or reduce the outstanding debt. The OIC process is not so easy, but I’ve heard the IRS is getting more helpful in guiding taxpayers through the process when they can’t afford a representative.
Use Form 656 to get the OIC process rolling. Be aware that filing an OIC will extend the time that the collections statute remains open for the time the offer is under consideration. This could be for a year or more. However, if the offer is accepted, the IRS would release liens against your husband, which may be affecting his ability to get a job.
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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.