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IRS STATUTE OF LIMITATIONS

For all taxpayers, an important rule to know is the IRS statute of limitations with all its nuance and details. In theory, the statute seems simple enough; however, there are some guidelines that can prolong or extend the period for paying back taxes which you owe.

Once the IRS statute of limitation is up, the IRS will no longer be able to collect on its debt, but the concept is not as simple as just merely allowing the clock to run out. Therefore, if you owe back taxes, your best bet is to contact us at Dallo Law Group to ensure your unique circumstances are all taken into consideration. For example, in cases such as fraud or bankruptcy, the game changes. Our tax attorneys and CPAs are equipped with an array of various expertises in the area of tax return statute of limitation. Do not hesitate to reach out to us for the best advice on how to handle your unpaid tax debt.

IS THERE A STATUTE OF LIMITATIONS ON TAXES?

Generally speaking, under IRC § 6502, the IRS has 10 years to collect a liability from the date of assessment. Once this statute of limitations has expired, the IRS may no longer go after you for taxes that you owe. First, it is important to note what exactly is meant by “date of assessment,” which is April 15th of the year your taxes were due or the date your return was actually filed – whichever date is later is when the clock begins ticking.

Secondly, an assessment is made when your tax liability (gross income minus qualified deductions) is recorded and signed by an assessment officer in the office of the Secretary of the Treasury in accordance with the laws approved by the Secretary.

THE COLLECTION STATUTE EXPIRATION DATE (CSED)

For the purpose of back tax collection, the IRS statute of limitations is known as the collection statute expiration date (CSED). It will always appear in IRS accounting records and will alert collections officers that the date has been decided. In a nutshell, the CSED is established once your tax assessment has been determined and it also states when the government’s right to pursue collection of tax liability finishes or the IRS statute of limitation ends.

TOLLING THE STATUTE OF LIMITATIONS

It is important to note that a taxpayer’s action may actually extend the IRS statute of limitations. There are certain scenarios where the CSED may extend depending on your individual case and actions. These include:

FILING FOR BANKRUPTCY

Commonly, the IRS statute of limitations is suspended during the automatic stay period of the bankruptcy proceedings, plus six months after the bankruptcy discharge date. The time extension does not include tax debt discharged in the bankruptcy.

INSTALLMENT AGREEMENTS

While a proposed installment agreement is pending, the IRS statute of limitations is put on hold. Likewise, during the appeals process if the proposed agreement was rejected and a timely appeal was submitted the same is the case. If a proposed installment agreement is rejected or terminated, the IRS statute of limitations suspension is extended for an additional thirty days.

OFFER IN COMPROMISE

If you decide to file an offer in compromise (OIC), your CSED will be extended for its duration plus an additional 30 days. Sometimes the IRS is limited from levying and the CSED will be suspended while an OIC remains pending, will be suspended for 30 days after the rejection of an OIC, and will be suspended during the period of an appeal of a rejection.

COLLECTION DUE PROCESS (CDP) HEARING

Once you submit a CDP and the agency receives it, the IRS statute of limitation is suspended and until the date the determination from court appeals becomes final. It is important to remember that the CSED remains suspended even if you paid the tax in full, as long as you are still disputing the payment. On the other hand, if you withdraw your CDP hearing request, the IRS statute of limitation will continue as of the date of withdrawal.

INNOCENT SPOUSE REQUEST

The IRS statute of limitation is suspended for the spouse that files for an innocent spouse relief request until the earlier of the date that the waiver is filed, or until the 90-day period for petitioning tax court has passed. If the taxpayer filing innocent spouse relief files a timely petition, the CSED is suspended until the decision is final, plus 60 days after the finalization.

MILITARY DEFERMENT

If you happen to be on active duty, the CSED period is generally suspended from the time your service begins, plus an additional two hundred seventy days after the service.

WAIVER TO EXTEND THE CSED

You may elect to sign a waiver provided by the IRS to extend your CSED at which time there can be an extension of up to five years.

CONTACT OUR TAX ATTORNEYS FOR MORE INFORMATION

It is certainly not hard to see that the IRS statute of limitations can be filled with many nuances which depend on individual circumstances. Repayment options are numerous and can be worked to your advantage; therefore speaking to a tax lawyer before making any decisions is your best bet to finding a solution that works the very best for you. We at Dallo Law Group have an abundance of experience to help you through this process. Our staff consists of both tax attorneys and CPAs who have worked closely with all the IRS and state agencies for many years. We have assisted numerous taxpayers with a resolution strategy suited for their unique cases. Give us a call to discuss your options and repayment strategies: 619-795-8000.