This may come as a surprise, but even the IRS admits that taxes are uncollectible from taxpayers in certain situations.
For some individuals, the IRS will permanently cease attempts to collect taxes. For others, the IRS will temporarily suspend tax collection, but will resume its efforts when circumstances change. The official description is currently not collectible (CNC), which means the individual owes the federal tax, but the IRS cannot collect it under existing conditions. When any taxpayer has an unpaid tax liability, the first question to ask is whether the tax is even collectible by the IRS.
What Statutes of Limitation Will Stop the IRS?
There are two important statutes of limitation that restrict IRS action against a taxpayer. The first time limit is on IRS collections and levies, while the second time limit is on IRS assessments. Here is a description of both limitations periods:
? 10-Year Limitation on Collection By Levy or Court Proceeding.
There is a 10-year limit on tax collection by levy or the initiation of court proceedings. IRC § 6502(a)(1). The clock starts running on the date of assessment, which is when the liability is assessed on the IRS form, at the IRS service center, as signed by the IRS agent. (For example, if 2008 taxes were filed in 2011 and the IRS assessed the tax in 2012, then the 10-year period for collection begins in 2012 and expires in 2022.)...
? General 3-Year Limitation on Tax Assessments.
Under the general rule, the IRS has three years to assess a tax. The clock starts running with the filing of the taxpayer’s return. If the taxpayer made substantial omissions to the return, then the period may be longer.
The IRS has six years to assess a tax when the taxpayer omitted reporting additional gross income in excess of 25% of stated gross income on the tax return. And no statute of limitations prevents assessment of tax when the taxpayer filed a deliberately false or fraudulent tax return. IRC § 6501...