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I Had IRS Tax Debt in a Chapter 13 Bankruptcy That Was Dismissed. – Sam

“Dear Jim,

The IRS is still trying to collect $15,000 from 2000. We were in Chapter 13 in ’08-’10 and the BK was DISMISSED in Dec. ’10. In Oct. of 2011 we began making monthly payments of $50. These payments are toward the $15,000 and $640.00 assesed for 2009.

Do we still owe the $15k? We entered the agreement AFTER the Statute of Limitations ran out after Chapter 13. We did so to stop the harrasing phone calls from the IRS. They are now informing us that the payment plan will continue for the next year. We have signed nothing to renew this plan. If we don’t owe it how should we stop paying and have all the $50 payment made last year applied toward the $640.00?

Thanks for any advise.

Sam”

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The Answer

Hi Sam:

Thanks for your question. Many people have the same misconception of IRS payment plans.

First – a summary of what I understand about your situation from your submission:

The IRS is still collecting on two debts – a 2000 debt of $15,000 and a 2009 assessment for $640 on a payment plan of $50 a month. The payment plan was sent up in October, 2011 with the IRS. The IRS says your statute of limitations on the amounts you owe have not expired and that you are still required to make payments under the current payment plan. You had filed for bankruptcy in 2010, but it was dismissed.

Your questions:

Do you need to keep making payments? The answer is yes, until the collection statute of limitations expires. Keep in mind, the statute of limitations is 10 years from the DATE OF ASSESSMENT. Each tax year, 2000 and 2009, will have different statute dates. Also, the statutes are EXTENDED for the amount of time that the IRS is not able to collect due to bankruptcy. Hence, your 2000 and 2009, will have unique collection statute dates based on your assessment history and bankruptcy duration. It is important that you determine all of the statute dates. You can call the IRS and they can tell you these dates. You should question this date if you see any apparent errors. Please feel free to ask me any questions about this computation also.

Can you have the payment applied to the 2009 debt and allow the 2000 to expire? When you enter into a payment agreement with the IRS, they are allowed to apply the payment to the oldest statute first. Hence, your $50 payment is being applied to your 2000 year – and when this statute expires – you will have the $640 debt still remaining in which the payment plan is applicable. In fact, this may be your current situation. I cannot tell based on the limited information that you have provided.

One important point- depending on your circumstances, you may want to consider filing an Offer in Compromise. You will need to know all the details about how much debt remains, your statutes, as well as your financial situation.

I hope this helps.

Jim

I Had IRS Tax Debt in a Chapter 13 Bankruptcy That Was Dismissed.   SamJim Buttonow is one of the resident debt experts here at GetOutOfDebt.org that helps people for free. Jim is a licensed CPA who spent 19 years with the IRS coordinating large compliance teams of IRS agents and specialized personnel. In the last 5 years, Jim has invented consumer and practitioner software and treatises on how to address many different tax issues. He has also represented many people before the IRS examination, collection, filing, and appeals functions. He currently assists taxpayers on an active pro bono tax practice aimed at serving people in need. He can be reached at IRSMind.com.

If you have a tax question you’d like to ask just use the online form. I’m happy to help you totally for free.

I Had IRS Tax Debt in a Chapter 13 Bankruptcy That Was Dismissed. - Sam by

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About Jim Buttonnow

Jim Buttonnow
Jim Buttonow, CPA/CITP, is cofounder of Beyond415. He has more than 26 years of experience in IRS practice and procedure. Reach Jim at [email protected].
  • Slesanderf

    Jim, Thank you for your quick response. I do believe that the $15,000 debt from 2000 is past the SOL by all standards. The assessment was when we filed in 2000, which would make the bill 12+ years old and even the Chapter 13  extention (which I believe to be untill the dismissal PLUS 3 months) should have been up in March of 2011. This should have become unenforceable at that point. My abject distrust of the IRS makes me wonder if they would honor this or find a sneaky way to keep extending the Statute of Limitations on this almost 13 year old tax bill. How could I find out for certain? I have worried over this for so long and then when I saw in my research that the SOL was 10 years, I have such tremendous hope.

    • http://GetOutOfDebt.org Steve Rhode

      Check with your bankruptcy attorney or an attorney licensed in your state.

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