You may have heard that the IRS only has 10 years to collect unpaid taxes. That is generally true, but don’t start circling a date on your calendar just yet. The IRS normally has 10 years from the date it assesses a tax, not necessarily the year you filed the return, to collect the debt.
This deadline is known as the Collection Statute Expiration Date (CSED). Once the CSED actually expires, the IRS generally can no longer legally collect that tax liability.
Why Can the 10-Year Deadline Change?
Ten years sounds straightforward, but calculating the CSED can get complicated because certain events stop the clock or extend the collection period.
Events that may affect the deadline include:
- Filing for bankruptcy
- Submitting an Offer in Compromise
- Requesting an installment agreement
- Appealing the rejection or proposed termination of an installment agreement
- Certain periods when you live outside the United States
For example, while the IRS considers an Offer in Compromise, the collection period is generally suspended. Bankruptcy can also suspend the collection period while the case is pending, with an additional six months generally added afterward.
That means simply counting 10 years from an old tax return can give you the wrong date.
Can the IRS Ever Collect After the CSED?
Ordinarily, once the actual CSED has passed, the IRS can no longer collect that liability. There is an important exception. If the government begins a timely court proceeding to collect the tax before the collection period expires, the collection period can extend beyond the ordinary 10-year deadline.
Your IRS account may also include several assessments with different expiration dates. An original balance, audit assessment, amended return assessment, or certain penalties may each have their own CSED.
Don’t Assume Your Tax Debt Has Expired
If you have an older IRS balance, determining the correct CSED should be one of the first steps in reviewing your collection options. Taking action without understanding the deadline can have unintended consequences, including extending the time available for collection.
Never try to calculate the deadline without help from a qualified tax professional; you could make a mistake you cannot afford. Highland Tax Group, we review your IRS account history, determine which collection deadlines apply, and help you understand your options.