If you’re currently paying off tax debt, you may not realize that the IRS doesn’t have unlimited time to collect on that debt. It generally only has ten years.
How Long Does the IRS Have?
The Collection Statute Expiration Date (CSED) is the date when your unpaid tax debt is no longer collectible by law. But there are many things you can do, sometimes unwittingly, to pause the clock on that ten-year period. This temporary suspension is called a “toll.”
Here’s a look at some things that can trip a suspension, or toll, on your CSED.
Filing for Bankruptcy
Some tax debts can be discharged in bankruptcy, but some can’t. If you file for bankruptcy and your tax debts aren’t discharged, the statute of limitations is tolled by the time in bankruptcy plus six months.
Requesting an Installment Agreement
An “installment agreement” is what the IRS calls a payment plan for your tax debt. If you request one, your statute of limitations is paused from when you submit the request to when the IRS gives you an answer.
The IRS may ask you to sign a form that gives it extra time for collection in exchange for granting an installment agreement. However, this extra time can’t be more than six years. The IRS has been known to put pressure on taxpayers to agree to these terms, especially when you’re close to the ten-year statute of limitations.
When that’s the case, it’s often a better idea not to sign the agreement.
Requesting Innocent Spouse Relief
“Innocent spouse relief” exempts you from having to pay interest, penalties, and extra taxes because of an error your spouse (or former spouse) made on your tax returns.
When you request innocent spouse relief, your statute of limitations is paused until your petition expires or until the court makes its decision.
Submitting an Offer in Compromise
An “offer in compromise” is an offer to pay an amount less than what you owe in back taxes. If you make an offer in compromise, the state of limitation is tolled from the time the offer is submitted plus 30 days following rejection and during the period while the rejection is being considered in appeals.
Requesting a Collection Due Process (CDP) Hearing
When the IRS decides you owe additional back taxes, you have the right to dispute that in a hearing. When you request one, however, your statute of limitations is suspended until your case is resolved. Unless there is only 90 days left on the statute, then it extended to equal 90 days.
Moving Abroad for Six Months
If you move outside the country for six consecutive months or more, your statute of limitations is tolled during the time you are out of the county. The period does not expire (where the taxpayer has been out of the country for six months or more) before a minimum of six months after the taxpayer’s return to the county.
Getting a Military Deferment
If you join the military, this can make it difficult for the IRS to collect on your tax debt. When this happens, the IRS may pause your statute of limitations for the duration of your service, plus 270 days (or 180 days, if you’re deployed in a combat zone) after it ends.
Filing a Taxpayer Assistance Order
If you’re facing a tax levy or lien that would cause an extreme economic hardship, you can file a Taxpayer Assistance Order for relief. Your statute of limitations will pause while your case is reviewed.
Sometimes the IRS Miscalculates the CSED
One important thing to note is that sometimes the IRS doesn’t calculate its own statute of limitations correct.
For instance, in 2012, the Taxpayer Advocate Service (TAS) found that approximately 20% of taxpayer accounts involved in IRS collection hearings for the fiscal years 2011-2012 had an inaccurate statute of limitations attached. In addition, in reviewing cases of unpaid income taxes from 1995 onward, it found that 18% of CSEDs listed were wrong.
More recently, TAS identified a systemic problem with computer glitches within the IRS that caused widespread errors in calculating the statute of limitations on collections.
Get Help From a Knowledgeable Tax Attorney
If you’re currently struggling with tax debt, it’s possible that your tax may be nearing the statute of limitations and if not, you may want to work with a tax attorney to obtain a long term tax plan to get you to that date.
However, there are numerous pitfalls to avoid. It’s not advisable to try this on your own as it is always advisable to obtain legal representation.
We’ve helped taxpayers eliminate or reduce their tax debt, and we can help you, too. Get in touch to schedule your free consultation by calling 404-551-5838 right now.
- The IRS, Cryptocurrency and Your Taxes: What You Need to Know - July 20, 2022
- Resolving Tax Debt with the IRS Fresh Start Program - June 17, 2022
- What to Do When You Receive an IRS Tax Lien Letter - April 15, 2022