The Internal Revenue Service (IRS) can exercise various powers. They can garnish your wages or seize your bank accounts. However, even the IRS has its limits—and those limits are set in stone. Case in point: the collection statute expiration date.
The term “collection statute expiration date” (CSED) refers to the amount of time that can pass before the IRS can no longer collect on a tax debt. In other words, if you don’t pay your taxes by the CSED, you may be off the hook.
However, there are several things to know about CSED. This article will help you better understand what it is and how it works.
What is the Collection Statute Expiration Date?
The collection statute expiration date (CSED) is the end of the collection period for the IRS to collect on a tax debt legally. Generally speaking, your CSED is 10 years from the date the IRS charged or assessed you for taxes. However, it can be extended or suspended in certain situations.
The CSED varies depending on the type of debt and state law. If you owe money to someone other than the IRS, you will often see this expiration date referred to as a statute of limitations.
How to Find Out Your IRS CSED
There are four ways to find out the CSED for your tax balances:
- You can call the IRS at 800-829-1040 and ask them directly.
- If you have received a Notice of Federal Tax Lien in the past, the CSED will be 10 years from the date of assessment on the notice.
- You can obtain account transcripts from the IRS’s online portal or by completing Form 4506-T, Request for Transcript of Tax Return.
- You can find out from your tax representative.
How to Extend or Suspend CSED
Below is a list of circumstances and common events that can trigger a suspension or extension of the CSED.
Filing for bankruptcy
The CSED is suspended while the bankruptcy is pending and then extended by six months after the conclusion of the bankruptcy case.
Filing an Innocent Spouse claim
The CSED is suspended from the date the Innocent Spouse claim was filed until either of the following:
- The earlier of the date of the filing of the waiver
- The expiration of the 90 days for petitioning with the tax court
- The date the decision of the tax court becomes final
Furthermore, the CSED gets an extension of 60 days for every instance there is a tax court petition.
Requesting an Installment Agreement (IA)
The CSED is suspended while the IA request is pending. If your request is rejected or the IRS proposes to terminate it due to payment defaults, the CSED is suspended for 30 days. Lastly, if you decide to appeal a rejection or termination, the CSED is suspended while the appeal is pending.
Submitting an Offer in Compromise (OIC)
The CSED is suspended while the offer is pending. The CSED is paused for an additional 30 days if the offer is rejected. If you appeal a rejection, the CSED is suspended while the appeal is pending.
Requesting a Collection Due Process (CDP) hearing
From the date the taxpayer submits the CDP request, the IRS suspends the Collection Statute Expiration Date (CSED) until the taxpayer withdraws the request or the CDP determination becomes final. If the CSED is less than 90 days until the determination becomes final, the IRS also extends the Collection Statute Expiration Date (CSED) by 90 days.
What Happens When the 10-Year Period Passes?
Once the 10-year period passes, the IRS will no longer be able to collect any money owed to them by sending you bills or making phone calls. Simply put, the law takes away the IRS’s collection powers for a particular tax liability.
While others may take advantage of the CSED to avoid paying taxes altogether, it’s not that easy. The IRS usually becomes more aggressive in its tax collection efforts for statutes that are expiring soon. That means the IRS is more likely to use every legal means. This includes tax liens and levies, to ensure the collection of what you owe.
As such, you must be mindful of the CSED for your tax liabilities. It’s in your best interest to work with a tax expert to figure out the best tax resolution method for your scenario.
Taxes can be confusing and tedious, especially when trying to figure out how to use the CSED as part of your tax resolution strategy. If you’ve been struggling with your tax returns or if the IRS has been on your back about paying back taxes, it may be time to reach out to tax professionals.
The experts at Tax Samaritan can help you navigate this process and find the best solution for your tax issues. We’ve been providing professional-quality tax resolution services to expats since 1997, so we know how to help.