The IRS 10 Year Statute of Limitations and the CSED
The IRS is the greatest collection agency in the world. It’s charged with collecting billions and billions of dollars in tax each year. Although it may seem like the Service makes its own rules, there are laws that protect taxpayers from the long arm of the IRS Collection Division. One law the IRS must adhere to is the ten-year collection statute.
The IRS typically has ten years to collect a back-tax debt, with the last day to collect the liability being called the Collection Statute Expiration Date (CSED). Internal Revenue Manual 126.96.36.199 states that “each tax assessment has a CSED. Internal Revenue Code section 6502 provides that the length of the period for collection after assessment of a tax liability is ten years. The collection statute expiration ends the government's right to pursue collection of a liability.”
IRS Collection Statute Expiration Date
Certain actions extend the CSED, suspending it for a length of time. These actions include submitting an Offer in Compromise, filing for bankruptcy, submitting certain Appeals, Pending Installment Agreement status, litigation with the IRS, a Taxpayer Assistance Order, military deferment and other items. Essentially, if the IRS is prevented from collecting the tax, the CSED will most likely be extended. You can see why the CSED may play a role in how you and the IRS resolve your back-tax debt.
The CSED and other key facts, such as your age, health and education, may play a role in whether the IRS will accept your Offer in Compromise. If you have a lot of years left on your CSED, you’re relatively young and healthy, the IRS may just reject your Offer with the belief that you can pay the total tax debt prior to the expiration of the collection statute.
Your Installment Agreement may also be affected by the CSED. A case in which the IRS would usually allow a taxpayer to pay a tax debt monthly over 72 months may have to be collected in less time, significantly increasing the monthly payment amount. The CSED could also influence your decision to commit to any action that would extent the time the IRS has to collect.
A few more tidbits to consider.
- A Short CSED makes negotiating Currently Not Collectible status on a tax liability more difficult.
- IRS collection tactics and enforced collection efforts may change due to a looming CSED.
- The IRS may even ask you to sign a waiver, extending your CSED(s), if their legal collection time is coming to an end.