"Did You Know?" #9

DID YOU KNOW The IRS has a time limit for collecting your balance owed?

Generally, the IRS only has 10 years from the date the tax was assessed to collect any balance due. The legal term for this is the Collection Statute of Limitations, often abbreviated “CSED.” This is a Federal law passed by Congress to protect taxpayers. Knowing what this CSED date is can be complex, and sometimes the IRS and the Taxpayer don’t agree on what that date should be.

There are many reasons that CSED could be extended or “tolled.” Some of the more common events that can cause this tolling are the taxpayer filing: for Bankruptcy, an Offer in Compromise, an IRS Appeal, and/or a lawsuit against the IRS. These are all situations where the IRS is prevented from collecting the balance due, therefore the CSED is paused.

The “assessed” date can cause confusion. It is normally the later of the due date of the return (typically April 15th) or the date the taxpayer files their tax return. This can change if the taxpayer files an amended return if the taxpayer is filing a return to correct a “substitute for return” created by the IRS, or if the IRS assesses an additional amount due in an audit. Be aware that the 10 years NEVER begins if a taxpayer does not file a return or if a taxpayer files a false or fraudulent return. In case you’re wondering, the IRS must prove civil tax fraud by “clear and convincing” evidence.

The good news is that after the expiration of the CSED, the debt is written off and the liability cannot be collected by the IRS.