Irs Installment Agreement Extend Statute of Limitations

If you owe money to the IRS, you may be considering entering into an installment agreement to pay off your debt over time. But did you know that this agreement can also extend the statute of limitations on your tax debt?

First, let`s review what the statute of limitations is. This is the amount of time the IRS has to collect taxes from you after the date the tax return was due. For most taxpayers, the statute of limitations is three years from the due date of the return or the date the return was filed, whichever is later.

However, if you enter into an installment agreement with the IRS, the statute of limitations is extended for the duration of the agreement. This means that if you have a five-year installment agreement, the IRS has up to eight years from the due date of the return or the date the return was filed to collect the taxes owed.

Why would you want to extend the statute of limitations? One reason is that it can give you more time to negotiate with the IRS and potentially reduce the amount you owe. It can also give you time to get your finances in order and make the payments more manageable.

However, it`s important to note that entering into an installment agreement does not stop interest and penalties from accruing on your tax debt. Interest and penalties will continue to accrue until the debt is paid off in full.

Additionally, if you default on your installment agreement, the statute of limitations will immediately expire and the IRS can then take collection action against you.

If you`re considering an installment agreement, it`s important to speak with a tax professional to fully understand the implications and make sure it`s the right decision for your specific situation.

In conclusion, an installment agreement with the IRS can extend the statute of limitations on your tax debt, giving you more time to pay off the debt and potentially negotiate a lower amount owed. However, it`s important to understand the implications and speak with a tax professional before entering into an agreement.