What is Tax Debt?

When you forget to pay or file your taxes, there is a mistake on your taxes, or the IRS wants to change your taxes, and the IRS says you owe money as a result, you’ve incurred tax debt. However you accrued the debt, it’s your job to make sure it’s paid off.

Worried about owing money to the IRS? You’re not alone. Every year, millions of American taxpayers are concerned about tax debt and the penalties that go along with it – which is why the IRS provides options to resolve their debt. There are many options to help reduce, and in some cases eliminate, tax debt, ranging from filing or correcting a tax return to arrangements like penalty abatement, installment agreements, or offers in compromise.

Do you owe the IRS money? Here are some things you need to know:

Owing the government tax money can be a daunting prospect, but understanding the basics is one way to make the process a little easier. The IRS has many options to help you pay your tax debt, including reducing the debt through filing, or correcting, an already filed tax return. If it becomes too much, don’t hesitate to get help from a professional.

Does tax debt have a statute of limitations?

Income tax debt does have a statute of limitations for when the IRS can collect on the unpaid debt. The total time for the statue is 10 years from when the penalty was assessed – this is known as a Collection Statute Expiration Date (CSED). Generally, this means that once that date is passed, the IRS has no choice but to forgo that debt.

Keep in mind that the CSED can be extended through various means, such as entering into an installment agreement, submitting an offer in compromise, having property seized, or entering in a period of non-collectability. However, if you are nearing the CSED date, it would be a stronger argument to have your debt partially absolved by submitting an offer in compromise.

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