Perhaps of all federal agencies, the Internal Revenue Service causes the American people the most amount of confusion and apprehension. The Internal Revenue Code is the most cumbersome and complicated set of statutes in effect today. As a consequence, taxpayers should understand basic elements of federal tax law, including how long the IRS has to collect back taxes.
Statute of Limitations
A statute of limitations governs the time period in which the Internal Revenue Service may take action to collect back taxes. The IRS generally has three years from the date taxes were due to be paid to initiate action to collect back or delinquent taxes. Exceptions to the three-year statute of limitations include tax evasion and concealment by the taxpayer.
Intentional Evasion or Concealment
If the IRS demonstrates that a taxpayer consciously evaded paying taxes and then concealed doing so, the time limit does not apply. However, the three-year clock does start ticking once the IRS actually discovers the potential evasion or reasonably should have detected the evasion and concealment.
Ongoing Collection Activity
Provided the IRS begins collection activity with the three-year period of the statute of limitations (or three years after the discovery of tax evasion and concealment), the agency can carry forth with its collection efforts into the future beyond any three-year period of limitation.
However, the agency must continue its collection efforts consistently and cannot sit idly by and not take action. If the agency fails to make such a reasonable and ongoing effort to collect delinquent taxes, the three-year statute of limitations will start to run from the last collection effort.