Tax Statute of Limitations: Talk to a Lawyer Before You Settle Your Tax Debt

Did you know that installing a tax debt can restart the statute of limitations period?

Many taxpayers choose to settle debts with the IRS or local tax authorities through installment agreements, thinking it’s the most practical option. But what most people don’t know is that this decision can reset the clock and hurt more than help.

What Is the Tax Statute of Limitations?

The tax statute of limitations is the legal period during which the government can legally collect a tax debt. If that time passes without valid enforcement, the debt may no longer be collectible.

But here’s the catch: certain actions interrupt this period — and one of the main ones is signing a payment agreement.

Installment Agreements Interrupt the Limitation Period

When you request an installment plan, you’re acknowledging the tax debt. This action interrupts the limitation period and starts it all over again.

So even if your tax debt was close to expiring, by agreeing to pay it in installments, you're giving the tax authority more time to collect.

Why You Should Consult a Tax Attorney First

Before you agree to any payment plan, it’s essential to consult a tax attorney.

A legal specialist can:

• Check if any of your debts are already time-barred;

• Assess whether an installment agreement is actually beneficial;

• Offer legal strategies to reduce or even eliminate the debt;

• Make sure you don’t pay what you no longer owe.

Don’t Pay for What’s Already Prescribed

Some people, out of fear of being penalized or restricted, end up paying debts that are already expired. This can lead to unnecessary financial loss.

Before making any deal with tax authorities, talk to a tax lawyer. You may be surprised by how much you can legally save.