The IRS has what is known as a Collection Statute Expiration Date (CSED). Logistically, the CSED is ten years. However, there are a number of waivers and extensions that the IRS can file for to extend the CSED. There are also exceptions to the ten-year rule. Below, we take a look at everything you need to know about the IRS statute of limitations on tax debt.
Ten Years to Collect After Assessment
The IRS has ten years from the date of the assessment to collect back taxes. In cases where you’ve filed a tax return, the date is generally the date of your tax return. If you neglected to file a tax return, the IRS will issue a notice, and the clock will begin ticking down then.
This brings us to a second question:
How Long Does the IRS Have to Assess Your Tax Liabilities?
Generally speaking, the IRS has three years to assess the tax from the date of filing. If you omit items or fail to disclose certain facts, the IRS has six years to assess your tax liabilities.
However, the IRS has an unlimited amount of time to assess a tax if any of the following are true. You:
- Failed to file a return
- Filed a fraudulent return
- Committed tax evasion
The IRS then has ten years after the date of the assessment to begin the collection process. Generally speaking, the IRS will make its most aggressive attempts to pursue outstanding taxes just before the CSED. If the IRS fails to act after the CSED, that money is lost forever.
What If You Didn’t File a Tax Return?
If you didn’t file a tax return, the IRS can begin the assessment process whenever they feel like it. They will have an indefinite period of time to do so. Eventually, they will file a Substitute for Return (SFR) that will assess your tax liabilities for the year or years you did not file. Once the SFR has been filed, the taxes have been assessed. The statute of limitations will begin ticking down then.
What Actions Could Toll or Suspend the IRS Statute of Limitations?
The IRS is legally able to toll the statute of limitations in some cases. This means that they can move the date when the statute of limitations begins ticking down. This effectively buys them more time and allows them to extend the CSED. The events below can toll the statute of limitations for tax debt collection:
Bankruptcy
If you’ve filed for bankruptcy, and the court issues a stay from your creditors, the statute of limitations is suspended during the bankruptcy and an extra six months is added on.
You’ve agreed to repay in installments
If you’ve agreed to a repayment plan, the IRS will not count the days between your request and their decision toward the statute of limitations. If your request is denied or you have stopped making payments, the IRS will add another 30 days to your CSED.
Innocent spouse relief
If you have asked the IRS to forgive a tax debt based on innocent spouse standing, the statute of limitations is tolled for the next 90 days. Additionally, the statute of limitations can be tolled until the court has reached a final decision.
Offer in compromise
If you have asked for an offer in compromise, the IRS will suspend the statute of limitations while your offer is being considered and add an extra 30 days.
CDP hearing
If you have requested a collection due process hearing, the IRS will toll the statute of limitations while the hearing is pending.
Military deferment
If the IRS cannot collect a debt due to military deferment, the statute of limitations is suspended during that period and an extra 270 days are added on to the CSED.
Taxpayer assistance order
If you have filed for a taxpayer assistance order, the IRS tolls the statute of limitations while the case is under review.
Litigation
If you are in litigation with the IRS (usually when the IRS files a lawsuit against you), the statute of limitations is tolled during the lawsuit.
Voluntary Extension of the CSED
As part of bargaining with the IRS, you can offer to extend the CSED. In other words, you can agree to an installment plan which partially repays your taxes on the condition that your CSED is extended, usually, for another five years.
Talk to a Fairfax VA IRS Tax Attorney Today
To learn more about how the IRS statute of limitations applies to your situation, contact Sodowsky Law Firm, PC. We can answer your questions and explain your legal options. Call us today.
