Ten years to collect
In theory, the IRS has only 10 years
from an assessment to collect. But this
limitation has so many exceptions, waivers
and extensions that it is often difficult
to compute the true "collection statute
expiration date" (or CSED in IRS-speak).
Nevertheless, thorough planning requires
an understanding of how the statute of
limitations applies to each case, and
a consideration of the consequences of
other actions, such as filing an offer
in compromise, requesting an installment
agreement, seeking a collection due process
hearing, or filing a petition in bankruptcy.
The IRS Restructuring and Reform Act
of 1998 made substantial changes to the
statute of limitations, and one provision
actually terminates many "voluntary" extensions
previously extracted from taxpayers as
of December 31, 2002.
Exceptions
The general statute of limitations is
in IRC 6502(a)(1): "(w)here the assessment
of any tax . . . has been made . . .
such tax may be collected by levy or
by a proceeding in court, but only .
. . within 10 years after the assessment
. . ." If that was the whole story, life
would be simple. But there are exceptions,
and then exceptions to the exceptions,
including:
- The time during which the taxpayer's
assets are under the control or custody
of a court, plus 6 months.
- The time during which the taxpayer
is outside the U.S. for a period of
at least 6 months, and for 6 months
after his return.
- The time the IRS holds property wrongfully
seized from a third party, or during
which it wrongfully has a lien in place
against the property of a third party,
plus 30 days.
- The time when collection action is
barred because the taxpayer is in bankruptcy,
plus 6 months.
In addition, an extension can result
from a voluntary agreement between the
taxpayer and the IRS (e.g. a Form 900
Tax Collection Waiver), or because the
taxpayer invokes some other collection-related
procedure, such as requesting a Collection
Due Process (CDP) Hearing, seeking "innocent
spouse" protection under 6015(b) or 6015(c),
filing an Offer in Compromise, requesting
an installment agreement, or requesting
a Taxpayer Assistance Order from the
Office of the Taxpayer Advocate.
Knowing how to determine the statute
of limitations bar date is important.
And knowing how to use it effectively
to resolve a client's tax problems is
even more important. If you have questions
about the statute of limitations, we
can help.
WANT MORE INFORMATION?
The Statute
of Limitations on Collection, published
by the Maryland Society of Accountants
in "The Freestate Accountant," as part
of Mr. Haynes' series on "Dealing with
the IRS Collection Division."
