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IRS Collection Statute of Limitations

Tax Debt Expiration Explained

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:

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.