By B. Watkins

What is the IRS Statute of Limitations? The IRS' collection statute of limitations refers to the maximum time period the IRS can seek to collect back taxes from you. It is also referred to as the CSED, or the collection statute expiration date.

The CSED period is usually 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 Statutes 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.

(Years ago the IRS was using form 900 - a waiver of the CSED - as a means to cutting deals with tax payers. They would be on the verge of levying, and agreed not to if the tax payer signed this form. While this took the heat off at that time, it also gave the IRS plenty of additional time to collect. This tactic was later banned.)

A Comment on the Statute of Limitations on Tax Returns Remember, 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.

You may get away with not filing for a few years. However, don't think that not filing the return is the solution to your problem - 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.

Nearing the End of the Statutes 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 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.

More Information:

• Collection Statutes
for IRS tax debt at IRSMind.com.
• Collection statute expiration date
at irs.gov.

Brian Watkins is a former Account Executive at Effectur, Inc. (http://www.Effectur.com) He coordinated the efforts of enrolled agents and other professionals to resolve client tax matters, managing roughly 180 cases. With first-hand customer and IRS experience, Brian aims to educate others as a writer for Effectur.

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