I have written about CSEDs before. These are the statute of limitation periods in tax cases; the “Collection Statute Expiration Dates.” In a previous blog post, I listed what kinds of events can suspend the CSED. Here I would like to address a couple additional details.
1. Waivers / Extensions (IRM 22.214.171.124)
If you are asked to sign a CSED waiver or extension, you are essentially agreeing to give the IRS additional time (beyond the standard 10 years) to collect the tax from you. You are giving up the tax relief available to you at the end of the tunnel. Before the 1998 tax reform, IRS revenue officers were essentially free to secure CSED waivers under any circumstances imaginable. Also, there were no restrictions on how many waivers could be obtained from the same taxpayer or how far into the future the CSED could be extended. Today CSED waivers have gone almost completely out of fashion, although some are still obtained in connection with installment agreements as required by law.
2. Substitute for Return (IRM 126.96.36.199.15)
A Substitute for Return (SFR) is an IRS-filed return that leaves out important exemptions or expenses you may be entitled to and may overstate your real tax liability. Some believe that if a taxpayer goes back and files his own original return, this action automatically resets the CSED for that particular tax year. This is not necessarily the case. If the original taxpayer-filed return results in a lower liability, the original CSED remains intact. And if the original return results in a higher liability, the CSED is updated (extended) only on the additional assessment. A fine distinction, but an important one nonetheless.