One of the favorite sayings of my first managing partner the late Herb Cohan was “I’d rather owe it to you than cheat you out of it.” To be honest, like some of the other sayings, it was never clear exactly what it meant.  Nonetheless, I think it sums up pretty well a tax strategy that is becoming more viable every year.  File a timely accurate return and just don’t pay.  Wait ten years and celebrate when the statute of limitation on collections runs out.

The Big Picture

In a piece last month – IRS Collections Appears To Be Broken –  I went over some of the numbers that indicate this strategy is a thing.  Most notably in the fiscal year ended September 30, 2019 the IRS wrote off $34.2 billion because of the ten year statute. That is more than double the $14.6 billion IRS wrote off in the 2010 fiscal year.  Keep in mind that this is assessed tax, interest and penalties.  It has nothing to do with taxes that were avoided by not filing or engaging in shenanigans on the return.

Although I have some reports from people who have the 10 year statute work for them, I have not, until this month, heard from somebody who plans on it.  He insisted that I protect his identity, so I am going to call them Henry, which I will explain later.  Henry is not his or her real name, unless it is.

This article is available on Think Outside The Tax Box.