What is the IRS Statute of
Limitations? The IRS' collection
statute of limitations "also
called CSED, or the collection statute
expiration date" refers to the
maximum time period the IRS can
seek to collect back taxes from
you.
The collection period usually ends 10
years from the date your balance
was assessed (formally entered in
the IRS records that you owe). When
this date passes, the IRS must erase
whatever balance you have. It's
not always that easy, though. If
they've placed a lien against your
assets, they can reduce the lien
to judgment and pursue the balance
for another ten years in some cases.
Can My Collection Statute Be Extended?
Yes, your statutes (CSEDs) can be
extended. Certain things, like bankruptcy,
can prolong the time the IRS has
to collect on you. When you file
bankruptcy, it stops the "count
down" for your CSED for the entire
length of time you're in bankruptcy,
plus six months. Some other ways
your IRS statutes can be extended
include:
- leaving the country for
a period of time
- filing for an offer in compromise
- collection due process hearings
- military deferment.
Any tax debt not included in the
bankruptcy will remain, and the IRS will
resume collection action once you come
out of bankruptcy. It's important
to consider the effect your actions
will have on CSEDs before taking
any of the above actions, especially
bankruptcy. In this way many people have the
unpleasant surprise of levy notices
on old balances they were sure must have expired statutes.
Statute of
Limitations on Tax Returns;
The tax debt expiration date is
ten years from the date of assessment.
If you've got an old return that
was just recently filed, the statute
of limitations will be ten years
from when it is assessed now.
Not filing
for a few years is not a good
choice, the IRS can file missing returns
for you. Since the IRS usually has
three years to file a substitute
return, they will hold off until
the end of this three-year period
to file. This gives tax payers the
opportunity to file themselves.
If the IRS does file a substitute
return, you can file your own return
over top, but it will take longer
to process. Note that unless filing
your own return increases the balance
beyond their assessment, the statutes
remain ten years from their
assessment on the substitute return.
End of Statute;
As the statute expiration date draws
near, the IRS will become much more
aggressive in its attempts to collect.
Besides the obvious result of collection
action, forming any type of agreement
with them will be harder. Since
the IRS (at this point) has little
time to collect, any payment plan will involve much
higher monthly amounts unless it
is proven you're unable to do so.
Even in this case, the burden of
proof may be a tougher sell.
If in fact the balance is substantial,
the IRS can reduce the lien to judgment
at the close of the statute of limitations.
This will allow them to pursue payment
of the balance for an additional
ten years.
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