Collection Statute Expiration Date
Generally the IRS has ten years from the date tax is assessed to collect the unpaid liability. Once a statutory expiration date is reached, the IRS must then abate the tax and release any liens filed against the taxpayer's property. This action is rarely automatic. Frequently the IRS will continue collection activity after a statute has expired, either out of administrative backlog or a perception of taxpayer ignorance. An important taxpayer “tip” in handling any outstanding tax liability that spans multiple tax years, is to designate any voluntary payments to the most recent assessments. The reason being that these assessments have the longest statutory time frame subject to collection activity. Earlier assessments have shorter statutory time periods. If a taxpayer does not make a designation of a voluntary payment, the IRS will always apply the payment to the tax period with the shortest time remaining under collection statutes. This is in the best interest of the government not the taxpayer. Frequently the IRS will apply voluntary payments this way out of default regardless of any taxpayer designation. It’s important to document any designation clearly on the payment.
However, there are some actions that can “toll” or stop this ten year period from running, thereby extending the time the IRS has to collect any unpaid liability. The most common actions that extend the statutory collection period are: a pending bankruptcy, a judgement or litigation in tax court, a collection due process appeal, a pending offer in compromise, any time the taxpayer resides outside the U.S. and when the taxpayer voluntarily signs a waiver extending the collection statute. Other less common actions pertain to military deferments, tax assistance orders and estate tax liens. Because each taxpayer’s situation is unique and may possess its own complexities, it’s important for the taxpayer to not assume that a tax liability has expired just because ten years has passed. Professional assistance is important.
View the video below for even more information about the Collection Statute Expiration Date.
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If I'm audited and have to pay additional tax, does the statute of limitations start to run when the agent bills me for the additional tax or when I filed my return for the audit year?
Would having a 'prior tax abated' (verbiage taken from a transcript) extend the 10 statuatory period? I was told my an IRS representative that because that was done, the CSED was from that date and not the date of initial assessment.
Thanks for the information!
Cory
Cory,
Good question. No, the abatement of tax does NOT extend the Collection Statute. The IRS employee's characterization is yet another example of the poor training normal for certain IRS employees. My guess is that statement was made to avoid disclosing that they had no idea what you were talking about!
Mike,
In an audit situation, the Collection Statute for the additional assessment would begin to run from the date of the additional assessment. In other words, the IRS has a fresh ten years to collect the audit assessment.
if i submit a return is there a time limit that theirs has to review my claim and respond to it? I submitted a late return and owed taxes and it took them over two months to respond. ed
Ed,
Generally speaking the IRS has 3 years from the date of the filing of the return to audit that return. (there are exceptions to that rule as well). Normally you will receive an acknowledgement of the filing of a return at about 60 days.
I have an installment agreement since 2004. I was not aware of the collection statue. I am not aware of any waiver. Is there a way to find out what my CSED is? If any waiver was signed? If my CSED is 2014 that would be a big relief, would I need a tax attorney to defend my case with the IRS?
If you would like to know exactly when the CSED is, it would help to have a tax attorney check on that for you. But the IRS may simply stop collection when the collection statute expiration date occurs. It's sort of hit and miss at times.
Hi, I need to know am I able to use the CSED for my student loans which I have been paying for over ten yrs but wd my deferments stop the statute from running.
Unfortunately, I don't know of a CSED on student loans as they aren't tax debts. As far as I know, student loans have no expiration date requirement for their repayment.