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How long does it take California tax debt to expire?

Taxes are not an area many people are savvy in. It is also not an area individuals generally enjoy pondering.

Because of this and its potential for complexity, it is not uncommon for a person to make a simple mistake leading to the revealing of tax debt after filing taxes or even months or years later. For those who suddenly find out they owe an unexpected amount to the IRS, it can be nerve-wracking. A main question many in this situation ask is, when does this debt expire?

The statute of limitations is 20 for the IRS, 10 for the FTB

After a tax assessment, the Internal Revenue Service has 10 years from completion of the assessment to collect tax debt. The Franchise Tax Board has 20 years. However, the FTB can restart the 20-year period or halt it through methods like issuing a levy. Filing for bankruptcy, fulfilling military service, being in a disaster zone and other circumstances may also pause the running of the clock for this period.

There are options for handling the debt

Individuals with tax debt may find themselves subject to wage garnishment, property liens, tax refund seizure and bank levies. However, to avoid these, they can opt for a long-term payment plan as long as they do not owe more than $25,000, filed all their income tax returns and do not take over 60 months to pay. They may also ask the FTB for “not collectible status,” which stops the government from removing money from their pay or bank accounts. Other choices include applying to the state’s tax settlement program called the Offer in Compromise or filing for bankruptcy.

The IRS and the FTB have long periods to collect tax debt. However, there are ways to manage the debt.