IRS Can Collect After Ten Years

IRS is not stopped from collecting after the 10-year collection statute of limitations expires. Section 6502 of the Internal Revenue Code provides that IRS has 10 years from the date a tax is assessed to either (1) levy, or (2) file suit to collect. The law does not block IRS from receiving payments more thanĀ 10 years after assessment of the unpaid tax. For example, assume a taxpayer received a promissory note on sale of an asset, and that monthly payments on the note will continue for another 15 years. Assume IRS served the notice of levy on the maker of the note one day before the expiration of the 10-year statute – section 6502. On the very next day the 10-year collection statute expired. The IRS is entitled to receive all payments on the note because it served the levy before the 10-year period expired. IRS’ right and authority to receive all future payments will continue even though no further levies can be served. The statute cuts off the authority to issue a levy after 10 years, but it does not cut off the right to receive payments after ten years so long as the levy is timely served.

This principle is confirmed in the Treasury Regulations at 301.6343-1(b)(1)(ii) which provides: “A continuing levy on salary or wages made under section 6331(e) must be released at the end of the period of limitations in section 6502. However, a levy on a fixed and determinable right to payment which right includes payments to be made after the period of limitations expires does not become unenforceable upon the expiration of the period of limitations and will not be released under this condition unless the liability is satisfied.”

For more information on collecting payments from installment notes see IRS can levy promissory notes.

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