Many of our tax relief clients know from personal experience that the IRS can very persistently chase taxpayers around for years trying to collect what is owed. But the Statute of Limitations (SOL) prohibits the IRS from pursuing a taxpayer indefinitely. Once the SOL is up, the tax debt “expires” and the IRS can no longer collect the debt.
The SOL for collection of a back tax debt is 10 years from the date of assessment. Since each tax period/form is filed and assessed on different dates, each tax period normally has a different expiration date. In the jargon of IRS Collections, this is called the Collection Statute Expiration Date (CSED). See IRS Pub 594 for further details.
In a perfect world, a 2008 tax return is filed and assessed in April 2009 and then expires in April 2019. However, there are a number of events that can toll (or extend) the SOL on a back tax debt:
- IRS investigation of a request for Installment Agreement
- IRS investigation of an Offer in Compromise
- Appeals determination
- If you live outside the US for a period of 6 months or more
- Bankruptcy (SOL tolled while the automatic stay is in effect)
- Collection Due Process hearing
- Tax Court Proceeding
- Request for Innocent Spouse Relief
Some of these procedures can last several months, which automatically adds the same number of months to the SOL. Anytime a taxpayer is considering one of the listed procedures, he/she should also take into account how it will affect the CSEDs. An experienced tax attorney can help with this important analysis.