Many taxpayers who owe the IRS believe that they will owe the government forever. However, that’s not true. The IRS only has 10 years to collect a tax debt once the tax is assessed, assuming that there are no actions taken by the taxpayer to stop collections. It is also known as the Collection Statute Expiration Date (CSED).
How is the CSED calculated?
The calculation begins on the date that the tax is assessed, if electronically filed, that’s usually within 24 hours of filing, but paper returns will take longer to get processed. HINT – that’s a good reason to always file on time, even if you can’t pay. If the taxpayer takes an action to keep the IRS from collecting, the clock will temporarily stop. Some examples that will stop the clock include –
- Filing BankruptcyFiling
- Fiing an Offer-In-Compromise
- Filing an Appeal
- A Pending Installment Agreement
Once the CSED expires, the tax debt Is no longer due and if a Federal Tax Lien is in place, it’s automatically released. It is important to review the IRS’s calculation of the CSED. In past cases, we have found examples of where the IRS is still collecting for a tax debt for which the taxpayer no longer has a liability. The calculation can be complex so it’s critical to understand exactly how a CSED is calculated.
There are some serious potential consequences of getting the calculation wrong. Whether you file bankruptcy or an Offer in Compromise, or wait out the CSED, could depend on where you are at in the CSED timeline. There are examples of when bankruptcy or an Offer In Compromise was filed when the statute was about to expire, putting the taxpayer at risk. Make sure that whoever you are working with is skilled in this area.
Do you Need Help?
If you need help in resolving your tax debt, we can help you. Please give me a call at (972) 821-1991 or at [email protected]. To learn more about us, visit our website at https://jablonskyandassociates.com/.
