The IRS has ten (10) years from the date of a tax assessment to collect a debt from the taxpayer.
The date the collection statute expires is called the Collection Statute Expiration Date or CSED.
When this date passes, the IRS is barred from attempting to collect your tax debt unless you waive the enforcement of the statute.
When Does the Collection Statute Start to Run?
The statute starts on the day an IRS assessment is made.
Generally, the dates of assessment are as follows:
- Filed tax returns – The date you mailed the tax return plus six weeks.
- Audit Adjustments (agreed) – The date you signed the auditor’s report plus three weeks.
- Audit Adjustments (unagreed) – The date the appeals process and the tax court process (if any) is completed and the tax court judge has issued his or her ruling.
What Will Cause the Collection Statute to be Extended?
The Collection Statute can be extended (tolled) by one or more of the following acts or situations:
- The filing of a bankruptcy petition - The statute is extended for duration of the bankruptcy proceedings.
- The filing of an Offer in Compromise - The statute is extended for duration of the Offer or one year, whichever is greater.
- The filing of requests for relief – The statute is extended when a taxpayer files for a Collection Due Process hearing, Innocent Spouse Relief and any other form of relief that requires the IRS to suspend collection enforcement while it reviews the validity of the underlying assessment.
- The signing of a waiver extending the statute - The statute is extended to date indicated in signed waiver. Never sign a statute extension without first consulting your tax advisor.
- The taxpayer is out of IRS jurisdiction – The statute is extended for duration taxpayer was out of IRS jurisdiction.
Our Advice to Taxpayers
In formulating a strategy for dealing with the IRS and in evaluating your options, it is critical that we accurately determine the date the collection statute expires.
The IRS has incorrectly calculated the CSED on many prior occasions. Consequently, you should never rely solely on an IRS agent’s statement of the CSED.
If you owe back taxes for several years, consult with an experienced tax professional before providing any financial information to the IRS collection office.
As you might expect, the IRS doesn’t like it when the collection statute expires because that means it won’t get paid.
This is why the IRS intensifies enforced collection actions as the CSED approaches.
And some IRS agents will even try to trick the taxpayer into signing a statute of limitations waiver.
This is why we strongly recommend that taxpayers do not represent themselves before the IRS collection division.