How Long Does the IRS Have to Collect on My Old Tax Debt?

On: October 26, 2018

10 YEARS.

I would like to able say that, but it is a little more complicated than that. The term the IRS uses is CSED (Collection Statute Expiration Date).

1. 10 years from the date of assessment, not the date you filed. This means the 10 year period starts the date the IRS has your tax liability in their system. The date on the bill.
2. If you never filed a return, and the IRS filed for you, the 10 year period never begins to run, unless you sign off on their return as an original return. The theory behind this is that, at any time, you can file an original return for yourself and blow their assessment (SFR) out of the water.
3. The ten-year collection period can end up lasting more than ten years because it can be suspended for one or more time periods. The time during which the statute of limitations is suspended is not counted toward ten-year deadline. For example, the collections period will be suspended during time periods the IRS is legally barred from taking collection action against you. This means that the limitations period is suspended if you file for bankruptcy and the bankruptcy court issues an automatic stay preventing the IRS from taking collection action against you–the suspension lasts for the period of the bankruptcy case plus six months. The period is also suspended while the IRS is considering your request for an installment agreement, offer in compromise, or request for innocent spouse relief, or while you live outside the U.S. continuously for at least six months. The IRS can also extend the ten-year period by suing you in federal court; however, it rarely does this.
4. If you enter into an installment agreement with the IRS allowing for partial payment of the amount due, you’ll likely have to sign a form waiving the ten-year limitations period. But this extension can be no more than six years. If your limitations period is nearing its end and you still owe the IRS substantial money, IRS personnel may offer you an installment agreement with attractive terms in order to get you to agree to extend the collection deadline. Consider carefully before agreeing to any such extension. You may be better off refusing to extend the deadline and let the IRS collect whatever it can before it runs out.
5. If, at any time, you file an amended return, the 10 statutory period begins as of the date that the IRS assesses that amount against you. So, if you file a return in 2014 and then amend it in 2016 and the date the IRS processes it and assesses a liability against you is May 5 2017, the 10 year statutory period will begin to run on May 5, 2017.

If a tax professional can get you into “currently non-collectible” status or enter you into an installment agreement based on your financial profile that ends up paying the IRS less than what you owe them by the CSED, this can often be the best resolution of a taxpayer’s case before the IRS. Often, it is better solution than the much touted Offer in Compromise.