Eliminate Tax Debt: 10 year Statute of Limitations

IRS tax debt expires after the ten-year statute of limitations expires after assessment. However, a number of events may toll the statute, pausing it, and in some cases adding time to it. The date upon which the taxes will expire is called the Collection Status Expiration Date (CSED).

The first step in analyzing when tax debt will expire is finding the latest assessment date. For most taxpayers, the assessment date is the day the return was filed. However, an amended return or an assessment following an audit examination creates a new assessment, causing the statute of limitations to run from that date.

Some taxpayers have multiple amended returns, an audit exam assessment, and audit reconsideration assessment all in the same year. In this case, whichever event produced the last assessment would control the CSED, ten years from that point.

Once the base CSED is established, time is added for all offer-in-compromises filed, whether accepted or not. For example, if a taxpayer files an offer-in-compromise after the last assessment date, and it takes the IRS 200 days to accept or reject the offer, 200 days are then added to ten years, stretching out the CSED.

Worse, if a taxpayer declares bankruptcy, and the tax debt is not discharged, the time that the bankruptcy is open, plus a 180-day penalty, is added to the CSED. (For information regarding the discharge of IRS debt in bankruptcy, please see our article: LINK.)

For example, if there are 250 days between the filing of a bankruptcy and the discharge or dismissal of the bankruptcy (assuming the tax debt has not been discharged), the 250 days, plus the 180-day penalty, is added to the end of the ten years, for a total of 430 additional days, stretching the CSED for more than another year.

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