IRS Statute of Limitations on IRS Collections

Thinking you will owe the IRS forever?  Many calls pour in to tax attorneys from taxpayers wondering whether the IRS “statute of limitations” will expire on an old IRS tax debt.  For the most part, the IRS has limitations on how many years it has to collect.

IRS tax debt assessment

The IRS generally has three years to assess taxes on a taxpayer from the due date of the return or when it was filed, whichever is later.   If there are unpaid taxes, shortly thereafter, an assessment is made when a certificate of assessment is signed off on stating the amount owed by a taxpayer.  See the IRS Procedures for Assessment of Tax under 25.6.1.9 in their Internal Revenue Manual.

Basics of the IRS Collection Statute Expiration Date (CSED)

As a general rule, there is a ten-year statute of limitations on IRS collections that begins to run from the date of assessment.   Thus, when you fail to pay in full when you file a tax return, the IRS will then mail you written notice of the amount due.  The date on this notice is generally your assessment date.  If you cannot find this first notice, you can find this date of assessment by ordering your tax account transcript.

Be aware, the IRS can prepare a substitute return (SFR) for you if you did not file.  See IRC 6020(b).  From this return, the IRS can make a deficiency assessment, which starts the ten-year period. Thus, not filing a return is the worst thing you can do, especially if you think you will avoid the IRS for ten years.  Check out this article on the consequences of late filing and what you can do about it.

Once the ten-year collection statute expires, the IRS can no longer collect upon your debt.  It essentially “falls off” from your account.  For example, if you filed your 2007 return by the due date of April 15, 2008 and the tax debt was assessed shortly thereafter, the CSED should have expired around April 2018.

If you are counting on the collection statute expiring soon, be sure to watch out.  As the CSED nears, the IRS typically gets very aggressive in its collection activities and often assigns a revenue officer on the case.  A revenue officer is an advanced tax collector that has many powers to quickly garnish wages and seize personal and real property.

For more information on the IRS collection statute, see the IRS Internal Revenue Manual.

Suspension or extension of the ten-year IRS statute of limitations

The ten-year collection period can end up lasting more than ten years because it can be suspended or extended for one or more time periods. Certain actions can suspend the running of time on IRS CSED’s, which also generally suspends the ability of the IRS to collect unpaid tax debt.  Some of the most common include:

1. Filing for bankruptcy. When you file for bankruptcy, the court issues an automatic stay preventing the IRS from taking collection action.  The suspension lasts for the period of the bankruptcy case plus six months.
2. Tax resolution determination. The period is also suspended while the IRS is considering your request (plus 30 days following rejection) for an installment agreement, offer in compromise or request for innocent spouse relief.
3. Partial payment Installment Agreement extension. If you propose a partial payment installment agreement (PPIA), the IRS will likely have you sign form 900 Tax Collection Waiver, waiving the ten-year limitations period. This extension can be no more than six years.  Be sure to carefully consider this extension.  It may be a wiser choice to refuse extending the deadline and let the IRS collect whatever it can before it runs out.
4. IRS suit in federal court. The IRS can also extend the ten-year period by suing you in federal court; however, it rarely does this.
5. Taxpayers who reside outside of the United States. The collection statute will be suspended if a taxpayer resides outside of the United States for six months or more.  Thus, the CSED will not expire until six months after the taxpayer comes back to the U.S.
6. Voluntarily extension of the statute of limitations period. If you agree to extend it, you can.  However, nowadays the IRS has limited powers to coerce taxpayers to do so.  As in the case above, the IRS can offer a reasonable partial payment plan if a taxpayer agrees to extend the statute.

Taxpayers needing tax help with regard to the IRS statute of limitations should seek the advice of a tax attorney.  The Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution. Our attorneys are primarily available to serve you in San Diego, Orange County and Los Angeles.  We are also available nationwide.  We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

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