Timing is critical when you’re dealing with tax debt. You may not be aware of the fact that tax debt can actually expire, but each tax assessment has an expiration date assigned to it when it is created. That means the debt you owe is essentially wiped away by default after a set period. The expiration date for owed taxes is referred to as the Collection Statute Expiration Date (CSED) by the IRS.
What Is the IRS Statute of Limitations on Tax Collection?
An IRS statute of limitations defines the period allowed for legal actions to be taken against you for unpaid debt. Yes, it may sound too good to be true. However, the reality is that getting to the end of a statute of limitations isn’t exactly easy. Simply “waiting out” the IRS isn’t necessarily a good idea because the IRS can and will use every legal collection tactic and penalty available while your debt is still legally collectible. However, there are ways to utilize your statute of limitations as a part of a tax-relief strategy if certain conditions are in play.
What Is a Collection Statute Expiration Date (CSED)?
The Collection Statute Expiration Date (CSED) is the date when the collection period for your specific debt “runs out.” However, it’s important to understand that there can be some twists and turns on the way to your CSED. Here’s a look at the basics:
- The Collection Statute Expiration Date (CSED) is 10 years in most cases.
- Any remaining tax debt that is still outstanding once a statute period has run its course will be forgiven. A statutory period begins on the date the tax debt is assessed.
- A statutory period begins by default on the date that the IRS creates a Substitute for Return (SFR) on behalf of a taxpayer if the taxpayer hasn’t filed.
The collection statute expiration date (CSED) does not cover all tax debt – there are some cases where debt will not automatically expire after 10 years. For instance, the amount of time that the IRS has to collect your tax debt could be increased if you file for bankruptcy, apply for Offer in Compromise (OIC), apply for innocent spouse relief, or request a collection due process hearing. What’s more, the period for expiration on your tax debt could be extended if you leave the country for a period of time. Some tax debt will actually never expire; for example, the IRS will not forgive tax debt if it is assessed as a result of a person being convicted of tax fraud.
How to Find Out Your IRS CSED?
The easiest way to find out your CSED for back taxes is to accurately determine the start date for your tax debt. You have a number of ways to approach this. You can simply look at the date of assessment if you received a Notice of Federal Tax Lien in the past. Your CSED will be 10 years from that date. In addition, it’s possible to get a more official answer by requesting a transcript of your IRS account to obtain information needed to make a calculation based on date of assessment and date of filing.
Does the IRS Forgive Tax Debt After 10 years?
Yes, the IRS effectively stops all collection efforts once your debt passes the 10-year threshold. However, 10 years doesn’t always mean 10 sequential years. Your debt age is always calculated based on the date of assessment. In addition, any qualifying event that suspends your CSED can prolong the lifespan of your debt.
How Long Can the IRS Collect Back Taxes?
The IRS generally has 10 years to collect tax debts. However, we’ve covered that a number of factors can extend the collection period on your specific debt. Here’s a list of circumstances that almost always extend CSED on debt:
- Living abroad for six months.
- Military deferment.
- A Collection Due Process (CDP) hearing.
- A taxpayer assistance order.
- Installment agreement.
- Innocent spouse relief.
- Offer in Compromise (OIC).
It’s also possible that the IRS will sue a taxpayer in rare cases. In this case, your statue of limitations will be suspended. It’s also important to know that your debt may never expire in a case where tax fraud has been proven. The bottom line is that CSED is a factor that can potentially be used as part of a tax-resolution strategy. However, it is only part of an effective strategy when the right conditions and knowledge of tax law are involved.
Here’s How Tax Group Center Can Help You
Tax Group Center is here to answer all of your questions about the statute of limitations on IRS collecting back taxes. The first step is often requesting records to get an accurate end date for your debt. Next, we’ll help you explore what steps should be taken to legally obtain tax relief options that apply in your case. Our experience shows us that taxpayers should never act on assumptions when it comes to CSED because miscalculations can often lead to bigger problems with the IRS. Our team of tax professionals has been helping taxpayers navigate the IRS statute of limitations and relief options for more than 30 years! Call us today to book a consultation.