In general, under IRC § 6502, the IRS will have 10 years to collect liability starting from the date of evaluation. Once this 10-year period or statute of limitations has expired, the IRS can no longer attempt to collect the balance owed by the IRS. As a general rule, there is a ten-year statute of limitations for IRS collections. This means that the IRS can attempt to collect outstanding taxes for up to ten years from the date they were assessed.
Subject to some important exceptions, after the ten years have elapsed, the IRS must stop its collection efforts. Every year, the statute of limitations expires for thousands of taxpayers who owe money to the IRS. You have been audited by the Internal Revenue Service (IRS) and it has been determined that you owe money to the government. So, you might be thinking that you are now on the debt hook for good.
However, that's not exactly the case. Although not widely shared by the IRS, every IRS audit tax debt has a collection law expiration date (CSED). Generally speaking, the IRS has 10 years to collect an unpaid tax debt, after which the debt is canceled. Towards the end of the CSED, the IRS tends to be more aggressive in its collection efforts, hoping that the taxpayer will pay as much as possible before the deadline or agree to extend it.
In a nutshell, the statute of limitations for federal tax debt is 10 years from the date the taxes were assessed. This means that the IRS must forgive the tax debt after 10 years. However, there are a few things to consider. In general, the IRS has 10 years from the date of evaluation to collect delinquent taxes and tax-related fees, although there are some exceptions.
This 10-year limit is known as the Revenue Act Expiration Date (CSED) and frees tens of thousands of Americans from their tax liabilities each year. Fortunately, lawmakers considered this practice illegal in 1998, but the IRS is still finding creative ways to get taxpayers to extend the statute of limitations period. As with most things tax-related, it can be a bit difficult to determine when the ten-year collection period of your tax debt ends. This means that you should carefully consider any type of installment agreement, preferably with the help of an experienced certified tax resolution specialist (CTRS), before signing on the dotted line.
During her years as an auditing representative for TaxAudit, Karen successfully defended company members throughout the federal and state auditing process, handled cases assigned to the United States Tax Court, and developed procedures to facilitate the auditing process for taxpayers. One way to avoid this is to address the start date with the IRS immediately after notification of an outstanding tax balance. However, if any of your penalties or taxes are reduced, this will automatically reduce related interest. Before an offer can be considered, you must have filed all tax returns, received a bill for at least one tax debt included in the offer, made all estimated tax payments required for the current year, and made all federal tax deposits required for the current quarter and the previous two quarters if the taxpayer is the owner of a business with employees.
The tax settlement date is the date you'll find on the document that serves as a Notice of Deficiency, and is the date on which the IRS agent who discovered your debt for the first time filed the appropriate form. While it's supposed to start when the tax is originally evaluated, the CSED is the subject of frequent disputes between taxpayers and the IRS. Karen attributes much of her tax acumen to the six tax seasons she spent as a return reviewer, analyzing thousands of returns. It is highly recommended that you coordinate with tax professionals who have experience helping people negotiate tax debt relief with the IRS, as they can better advise you on when your CSED is likely to receive your history and if you should contact the IRS given your current circumstances and position, or possibly wait for it to happen.
If you've been struggling to pay a tax debt for a significant period of time and you think your collection period is coming to an end, it's best for you to contact a tax professional and reasonably explore your options. For more information, see the Taxpayer Bill of Rights, Publication 1, Your Rights as a Taxpayer, Publication 594, The IRS Collection Process (PDF) and Publication 1660, Collection Appeal Rights (PDF). He is a certified public accountant (CPA), has records in Alabama and Georgia, and is an expert in consumer income taxes, including electronic taxes and tax data protection. You may have options to reduce the amount you owe, depending on the circumstances that led to your tax bill.
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