If you’re concerned about the Internal Revenue Service and its ability to collect unpaid taxes. However, there is a collection statute of limitations period that applies. This means that the IRS has a limited certain period of time to collect unpaid tax debt, known as the IRS Collection Statute Expiration Date, or CSED.
This article will discuss the CSED in depth and inform you, the taxpayer, on:
- How the CSED works
- How to find out your IRS CSED
- When the IRS may extend the CSED
- What the IRS collection efforts may look like during the CSED
Let’s begin by discussing what the CSED is.
What is the CSED?
The CSED, or Collection Statute Expiration Date, is the end of the IRS collections period as defined by federal law. As a general rule, the CSED date is the end of the 10-year period after date of assessment of a taxpayer’s liability for a given tax year.
After the CSED, any outstanding tax liability is generally considered uncollectible. There are a couple of exceptions.
However, there are a couple of factors that may impact the CSED.
The tax assessment date might not be what you think it is.
The tax assessment date isn’t the due date of a tax return, nor is it always attached to any particular date at all. Each tax assessment has its own CSED, based upon the tax assessment date.
The tax assessment date is the date that the tax for a given year was assessed by the IRS. But IRS employees have a statute of limitations on how long they can take to assess a tax, as well. That limit is known as the Assessment Statute Expiration Date (ASED).
What is the ASED?
The assessment statute expiration date is the last date that the IRS may assess a tax liability for a given year. Generally speaking, the ASED is the later of the following:
- 3 years from the received date of a taxpayer’s income tax return, OR
- 3 years from the original return due date
For taxpayers who do not file a timely or accurate return, the following rules apply:
For taxpayers who did not file a tax return
The IRS may assess tax liability under the Substitute for Return (SFR) program. Essentially, the IRS can assess tax and any additional tax at any time by filing a substitute return on the taxpayer’s behalf.
The 3 year time-limitation begins when the taxpayer actually submits a tax return. Until then, the IRS has no ASED, and subsequently, no CSED.
For taxpayers who sign a statutory waiver
The IRS may ask a taxpayer to sign a statutory waiver or extension agreement, which would extend the period of limitations for tax assessment. The taxpayer does not have to sign the waiver, but if signed, the extra time granted by the waiver or extension agreement applies.
For taxpayers who omit 25% or more of their gross income from a tax return
If a taxpayer omits 25% or more of their gross taxable income from a tax return, then the length of the period for tax assessment increases from three years to six years after the tax return’s original due date or the date it was filed.
For taxpayers who file a false or fraudulent tax return
If a taxpayer’s return is fraudulent or filed with the intention to evade tax liability, then there is no limit to the amount of time that the United States government has to assess back taxes.
IRS Publication 1035-Extending the Tax Assessment Period, contains more information about ASED extensions.
The CSED can be put on hold.
Let’s imagine that the IRS has assessed your tax liability. There are certain circumstances where the IRS may put the 10-year collection period on hold. This is known as a tolling event.
Tolling events can suspend or extend the CSED. An event that results in a suspended CSED means that the IRS has stopped collection efforts for the suspension period. However, the IRS will delay the CSED by the length of the suspension period.
An extended CSED occurs when a taxpayer signs a waiver to extend the CSED. CSED extensions might happen if the taxpayer is in discussions for a partial payment installment agreement to resolve their IRS tax debt.
Types of tolling events
The Internal Revenue Manual contains a comprehensive list of tolling events for IRS agents to consider when assessing a tax situation. Below are some of the main events for taxpayers to consider.
During bankruptcy proceedings, the IRS will suspend the CSED. The IRS may not take collection action on any IRS debt for the duration of the bankruptcy proceedings, and for six months afterwards.
Judgment or litigation action
A court action brought against a taxpayer for tax collection purposes prior to the CSED extends the CSED until:
- The taxpayer satisfies the tax debt, or or
- The tax debt becomes unenforceable
Collection due process
If the taxpayer submits a timely request for a collection due process hearing, then the IRS will suspend the CSED from the time the IRS receives the CDP request until either:
- The date the taxpayer withdraws the request, or
- The date of final determination, to include any appeals in federal court or tax court
If there is less than 90 days remaining when the decision becomes final, then the IRS will extend the CSED for 90 days.
Offer in compromise
If a taxpayer submits an offer in compromise, then the IRS will suspend the CSED for the period of time the IRS is considering the offer. If the IRS rejects the offer in compromise, then the IRS will suspend the collection period for another 30 days after rejection.
The IRS will suspend the CSED for the duration of any taxpayer appeals.
For taxpayers who request an installment agreement, or a payment plan to pay down their tax balance, the IRS will suspend the collection period while considering the installment agreement.
If the IRS rejects the agreement request, the IRS will suspend collection efforts for another 30 days after the rejection date. If a taxpayer defaults on installment plan payments, and the IRS decides to terminate the installment agreement, then the IRS will suspend collection efforts for another 30 days.
As with an offer-in-compromise, the IRS will suspend the CSED for the duration of any taxpayer appeals.
Request for innocent spouse relief
If a taxpayer files IRS Form 8857-Request for Innocent Spouse Relief, the IRS will suspend collection action against the requesting spouse only. This suspension ends either:
- The day a waiver is filed, or
- The end of the 90 day period that a taxpayer can petition the tax court, or
- The date of a tax court’s final decision
In any case, the IRS will extend the CSED by 60 days.
Living outside the United States
If a taxpayer lives outside the United States for a period of six consecutive months, the IRS will suspend the CSED. However, the CSED will not expire until at least six months after the taxpayer’s return to the United States.
Deployment to a combat zone
In the case of taxpayer who is deployed to a combat zone, the IRS will suspend the CSED until the taxpayer returns to the United States plus 180 calendar days.
Under the Servicemember’s Civil Relief Act of 2003 (SCRA), the military deferment of unpaid tax collection applies to tax debt accrued prior to active duty service. The IRS will suspend the CSED of this debt during the active duty service plus 270 calendar days.
Lesser known reasons
Some of the lesser known reasons for the IRS to suspend the CSED are below:
- Wrongful levy
- Wrongful lien
- Taxpayer assistance order
- 2-tier tax scheme
- Substitute for return
The Internal Revenue Manual contains more detailed information about CSED suspension and extension.
How can I find out my IRS CSED?
Order a copy of your IRS account transcript
You may order a record of account transcript through the IRS website or by filing IRS Form 4506-T: Request for Transcript of Tax Return.
The earliest CSED will appear on the transcript.
Ask your tax professional
If a tax professional, such as a CPA or enrolled agent, prepared your tax return, you should ask them to help you obtain a copy of your tax transcript. Your tax professional is probably the best person to help you deal with the IRS.
Ask the National Taxpayer Advocate
The Taxpayer Advocate Service exists to help protect taxpayers against unlawful collection activity. The TAS can be a starting point for taxpayers who don’t have anywhere else to turn.