Every tax assessment has a collection statute (CSED) expiration date. Section 6502 of the Internal Revenue Code states that the duration of the collection period after the evaluation of a tax liability is 10 years. The expiration of the collection statute ends the government's right to request the collection of liability. As a general rule, there is a ten-year statute of limitations for IRS collections.
This means that the IRS can try to collect your unpaid taxes for up to ten years from the date they were evaluated. With some important exceptions, after the ten years have elapsed, the IRS must stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe money to the IRS. Under certain circumstances, the IRS will forgive the tax debt after 10 years.
However, that 10-year period may be longer than expected, given the extended suspensions, the IRS tax assessment date compared to your last return, and whether or not you have been keeping up to date with your tax returns since the debt period began. In general, the IRS has 10 years after the evaluation date to collect back taxes and tax-related fees, although there are some exceptions. This 10-year limit is known as the expiration date of the Collection Act (CSED) and frees tens of thousands of Americans from their tax obligations every year. Generally speaking, the Internal Revenue Service has a maximum of ten years to collect unpaid taxes.
After that time has elapsed, the obligation is completely erased and removed from the taxpayer's account. This is considered “amortization”. The ten-year period is recognized as the limitation period in tax balances or the expiration date of the collection statute, commonly referred to as CSED. Taxpayers cannot easily identify this limitation because it is not in the best interest of the IRS to cancel a liability.
Your ten-year term begins when you file your tax returns and owe taxes. The IRS has three years from the date you file a tax return to assess any additional taxes that could result in an IRS liability. They don't make the ten-year limit comprehensible to taxpayers for fear that a taxpayer will simply wait for time to pass. If you're choosing to delay collection and “wait until the deadline”, then you'll want to be prepared for the Internal Revenue Service's collection tactics to become severe.
When the time for your CSED approaches, the Internal Revenue Service will adopt more aggressive measures. Aggressive actions may include filing tax liens or issuing a tax lien on your bank accounts or your salaries. The quickest tactic to prevent collections from being made is to accept payment plans established by the Internal Revenue Service, also known as an installment agreement. Before you decide to take any matter into your own hands with the Internal Revenue Service, you should consult tax professionals who are experts trained in negotiating with the IRS regarding tax liability and in providing tax relief.
Fortunately, legislators considered this practice illegal in 1998, but the IRS is still finding creative ways to get taxpayers to extend the statute of limitations. If you didn't file a tax return, the IRS can create a replacement return for you and make a deficiency assessment, starting the ten-year period. You should be aware that this 10-year period for collecting a balance due by the IRS may be extended in certain cases. Other examples include the period during which the IRS considers installment agreements, commitment offers, and help for innocent spouses.
However, when advising clients or negotiating with the IRS on the release of liens and other issues affected by these rules, it would be best to follow the obviously favorable analysis of the IRS from the Office of the Chief Counsel, unless and until the courts determine that another interpretation is more appropriate. The statute of limitations is an affirmative defense that the taxpayer must present, so it would not be wise to rely solely on the hope that the IRS will contact us magnanimously to share the good news that your client's tax debts are no longer legally enforceable. In the case of tax debts with the IRS, it's generally not reasonable to assume that you can simply let go of your CSED. In addition, if you tried to hide your income or filed a fraudulent tax return, the statute of limitations does not apply to the attempt to collect a balance due by the IRS.
For example, the collection period will be suspended during periods when the IRS is legally prohibited from taking collection actions against you. So, if for the entire term of an installment agreement the statute of limitations was automatically extended, what purpose would it be to explicitly allow the IRS to request a voluntary legal exemption in connection with an installment agreement? This inconsistency was resolved through the technical correction of the CRTRA. Secondly, the changes from the RRA to the Code were so confusing and internally inconsistent that two years later, a technical correction provision had to be passed in the Community Renewal Tax Relief Act of 2000 (CRTRA), p. 12, and in the meantime, the IRS had to reconcile conflicting positions through an administrative policy.
If you've been struggling with tax debt for a significant period of time and you think you may be coming to the end of your collection period, it's in your best interest to contact a tax professional and reasonably explore your options. This includes filing for bankruptcy, as the IRS is legally prohibited from collecting your payments during this period. Thus, despite the legislative authority under the RRA to automatically extend the statute of limitations for the entire term of an installment agreement, it seems that the IRS preferred to rely on its traditional method of extending the term through signed exemption agreements. .
