The collection statute expiration date (CSED) ends the government’s right to pursue collection of a liability.
By law, the IRS statute of limitations on collecting a tax debt is 10 years.
Did you know that the IRS only has 10 years to collect a tax debt? According to federal tax law, Internal Revenue Code (“I.R.C.”) Sec. 6502, the length of the period for the IRS to collect is 10 years after “assessment” of a tax liability.
An assessment is nothing more than the recording of your tax debt in the IRS’s records. When you file a tax return, an assessment is automatically entered based on the tax liability shown on Line 44 of Form 1040.
If you have questions about the 10 year IRS statute of limitations on collecting a tax debt, or the circumstances that would toll the 10-year statute, contact the experienced IRS tax lawyer in Columbus, Ohio for a consultation today.
When Does the 10-Year Period Start to Run?
The 10-year statute of limitations begins to run on the date of “assessment” of the tax. The IRS has only 10 years to collect the tax. The date that the IRS is no longer allowed to collect the tax is called the collection statute expiration date (“CSED”). Once the CSED expires, the IRS cannot legally collect the tax debt. But, as discussed below, there are several circumstances that taxpayers undertake to deal with the IRS that extend the 10 year IRS statute of limitations.
There are three types of assessments: (i) an automatic/summary assessment (discussed above typically the date you file your return); (ii) a deficiency assessment (typically made after an IRS examination has concluded); or (iii) a jeopardy assessment.
If you are late filing your tax return, the date of assessment is the date the return is filed, not the date in which the return was due. As an example, if your 2014 return is not filed until 2016, the assessment is 2016. In this case, the IRS statute of limitations on collection would not expire until 2026, at the earliest.
If you do not file a tax return, the statute of limitations will not begin until something happens. The IRS may file what is known as a substitute for return (SFR) for you. An assessment based on a SFR will start the 10-year statute.
Tax Tip – if you do not file, the collection statute never begins. The earlier you file, the sooner the collection statute starts to run. If you have not filed taxes in many years, don’t wait to get into compliance.
How Can I Find My Assessment Date?
If you are receiving notices from the IRS about a tax liability that is more than 7 or 8 years old, you may want to investigate your assessment date. Why? Because your assessment date is the basis for determining the CSED date. In other words, once you know the assessment date, you will be able to determine the date that the IRS can no longer pursue your tax liability.
To find your assessment date, the easiest way is to review the Notice of Federal Tax Lien (“NFTL”). The date of assessment is identified on a NFTL. Simply calculate 10 years from that date and you will have a rough estimate of your CSED.
Or you can obtain a transcript of your IRS tax account. Tax account transcripts will tell you the assessment date, when your return was filed, and a variety of additional data such as return type, marital status, adjusted gross income, taxable income and all payment types. Tax account transcripts also show changes made after you filed your original return.
Obtaining tax account transcripts is easier than ever. The IRS allows taxpayers to order transcripts online. Or you can file Form 4506-T with the IRS. Porter Law Office, LLC can obtain tax account transcripts on your behalf after engagement with a standard IRS power of attorney (Form 2848). Contact us!
What Will Extend or “Toll” the 10-Year Statute?
The tax code contains several provisions that operate to “toll” the IRS statute of limitations on collection. The most common events that toll the statute of limitations include:
- Offer in Compromise (“OIC”) – I.R.C. Sec. 6331(k) suspends the statute of limitations on collection for the period of time during which an offer in compromise is pending, for 30 days after rejection, and while a timely filed appeal is pending.
- Bankruptcy – Similarly, I.R.C. Sec. 6503(h) operates to suspend the period of limitations on collection for the period of time during which the IRS is prohibited from collecting a tax due to a bankruptcy proceeding, and for 6 months thereafter.
- Collection Due Process (“CDP”) – The statute of limitations on collection is suspended from the date the IRS receives a timely filed request for a CDP hearing to the date the taxpayer withdraws their request for a CDP hearing or the date the determination from Appeals becomes final, including any court appeals.
These statutory suspension provisions toll the period of limitations on collection even if the period of limitations on collection previously has been extended pursuant to an executed collection extension agreement. Klingshirn v. United States (In re Klingshirn), 147 F.3d 526 (6th Cir. 1998).
Do Installment Agreements Toll the CSED?
Generally speaking, installment agreements do not toll the CSED. That means if your CSED has not elapsed, but it is getting close, you could get into an installment agreement with the IRS to protect you from aggressive enforced collection action. This will allow you to wait out the CSED. You could also request to be placed into currently not collectible (“CNC”) status with the IRS, which also does not toll the CSED.
While the CSED is not suspended while an installment agreement is in effect, the CSED is suspended during periods when the IRS is prohibited from levying, which includes the time an installment agreement request is pending with the IRS. See 5.1.19.3.5 (04-26-2018) for more information.
If you are granted a partial payment installment agreement, however, Form 900, Tax Collection Waiver, may be executed to toll the statute of limitations on collection. But these circumstances are narrow. See IRM 5.14.2.1.3, Waiver Procedures for Partial Payment Installment Agreements. IRS policy dictates that a Form 900 be limited to no more than five years, plus up to one year to account for changes in the agreement.
What to Do When Your CSED Expires
If your CSED has expired, the IRS cannot collect the tax liability for that year any longer. If the IRS has filed tax liens, you should move forward and get them released. You can then go through the process of notifying the three major credit reporting agencies.
Contact an Experienced Ohio Tax Attorney
IRS Statute of Limitations Attorney | Columbus Ohio Tax Lawyer
Porter Law Office, LLC can assist you determine your CSED and the events that may toll the CSED. Frequently, taxpayers have no idea how much they actually owe the IRS. We can help by obtaining the information you need to know how much you owe the IRS for each tax year, the dates of assessment, the events that toll the CSED, the amounts of penalties and interest that have accrued on your account, and much more data.
Columbus tax attorney Matthew R. Porter, Esq. LL.M. has in depth experience assisting taxpayers with resolving IRS collection matters prior to any levies of income or assets. Contact the experienced IRS and Ohio tax lawyer today for a consultation to discuss your case.