Will the IRS ever stop trying to collect back taxes they say I owe them?

Question

The IRS says I owe taxes from a settlement in 1998. It was from a personal injury related suit. I don't believe I owe them any thing and I am living month to month on SS and have no savings at all. The IRS has already taken all the money I had in the bank. My monthly S S payment. How long can they do this?

Answer 1

Until the money you owe them is satisfied

IF you had filed tax returns you might have been able to avoid some taxes

Just because you don't believe you owe them anything is irrelevant.  What are the facts?  Did you respond to any of the IRS mailings?  Did you file your tax returns?  Dild you read any IRS publications on the topic?  Did you talk to your attorney about this?  Did you receive a 1099 form?

Failure to take care of this matter at the time has caused the amount you owed the IRS to grow with penalties and interest.  They will not stop until satisfied.  You had plenty of money and could have paid them, you spent the money instead and they've been chasing you and will continue to do so.

Answer 2

As long as the IRS thinks you owe them they can and will continue to pursue you.  If you have any actual proof that you own nothing, provide that.  Just because you have no money is no excuse to not pay your taxes.  If you collected money from a personal injury suit you owed them taxes on that money.  If you didn't pay, you still owe them the money.

Answer 3

You need to file a tax return for that year that proves you dont owe them.

Answer 4

The IRS will keep after you until the bill is paid in full. that includes penalties and interest  You should contact them and work out some type of payment plan you can afford.  This problem will not go away

Answer 5

There is a pretty detailed calculation as to how long they can collect on this (usually 10 years from the date of assessment which doesn't occur until AFTER the return is filed, unless bankruptcy or Installment Agreements are involved which lengthen the statute), but in most cases, they can do this until your debt is paid in full or the statute runs out.  

However, personal PHYSICAL injury income is non-taxable, with the exception of punitive damages.  (IRS Code 164 (a)(2).)  It's a little different if it's related to mental anguish, but you didn't mention any of that.  Any letter they send you will have a contact number.  Find the most recent letter you have and contact them immediately to speak with someone.  The wait will be long, but you need to find out what to do as far as showing the income is non-taxable, and having the levy on your account released, and the funds returned possibly with interest.

In many cases they can put a hold on your account and the levy (usually 30 - 60 days) until you can supply them with the proper information.

So you know, in these cases, the IRS does not always receive information showing what type of income it is necessarily, just that it's income, which is probably why there is a problem.  Just make sure what you received was directly related to your physical injury, and is not punitive damages. Also, some income related to wages you would have received during the time you were injured, is taxable in some cases, too, so be careful.

If you do owe, and they believe you can pay (just because you don't think you can doesn't mean they won't) they can work out a payment plan.  If you don't have the funds according to them, they'll enter you into uncollectible status until your situation changes.  In the end, you might need to seek a professional, if it looks like it's going to be too much for you to handle.

Hope this helps!!

P.S.  Amended Information - I apologize.  I was working on an Installment Agreement case at the time of writing this and had them on my mind.  The statute is extended in the case of bankruptcy or an Offer in Compromise-not Installment Agreements.  I apologize for any confusion.

Answer 6

The statute of limitations for collection expires 10 years from the date of the first bill sent.  Something from 1998 should be getting pretty old.

A bald statement "I don't believe I owe them any thing" means absolutely nothing.  Why don't you believe you owe anything?

If you are unable to pay the account can be reclassified currently not collectible and IRS will not make active efforts to collect unless your situation improves before the statute of limitations expires..

Answer 7

If the money was from a personal injury related lawsuit, either your lawyer screwed up or your winnings weren't just for your injury.  Punative damages or money for lost wages was in fact taxable.

Unfortunately for you, you let this drag on.  The money was in 1998, so you should have included the money on your taxes in 1999.  The IRS has a minimum of 10 years to collect the money.