Generally speaking, the Internal Revenue Service has a maximum of ten years to collect on unpaid taxes. After that time has expired, the obligation is entirely wiped clean and removed from a taxpayer’s account. This is considered a “write off”. The ten-year timeframe is recognized as a Statue of Limitations on tax balances or a Collection Statue Expiration Date, commonly referred to as a CSED. This limitation is not easily identified by taxpayers because it is not in the best interest of the IRS to write off a liability. Your ten-year time begins when you file your tax returns and owe taxes. The IRS has three years from the date you file a tax return to assess any additional tax which would result in IRS liability. They do not make the ten-year limit understandable to taxpayers because of the fear that a taxpayer will just wait out the time. If you are one who is selecting to delay the collection and “wait out” the timeframe then you will want to be prepared for the Internal Revenue Service Collection tactics to get severe. When the time is approaching towards your CSED, the Internal Revenue Service will become more aggressive in their actions. Aggressive actions can include filing tax liens or issuing a tax levy on your bank accounts or wages. The quickest tactic to stop the collections from happening is to agree to payment plans set out by the Internal Revenue Service, otherwise known as an Installment Agreement. Before choosing to take any matter in your own hands with the Internal Revenue Service you should consult tax professionals who are trained experts in negotiating with the IRS regarding tax liability and providing tax relief.
There are many actions that can occur in which your statute of limitations can be extended. Below is a list of common actions that can temporarily stop the time from ticking.
- Being out of the country for at least 6 months
- Filing for bankruptcy
- Filing appeal requests
- Filing an Offer in Compromise application
- Signing a waiver to extend the original CSED’s for various reasons
While these actions are under examination and pending determination the Collection Statue Expiration Dates will be paused. By pausing the time, the CSED are ultimately extended longer. Sometimes it can take months after the closing of a case for the clock to commence again. For instance, an Offer in Compromise can be reviewed for nine months. During that nine-months, the CSED dates are paused. Likewise, if you file for bankruptcy it can take up to six months after closing for the collection time to begin again.
Once the statute of limitations has expired, it is up to the taxpayer to confirm that the liability has been removed. The IRS will rarely send a notice saying they have written off the tax liability. They will make sure to deliver about five notices to make you cognizant of a balance due, though! If you feel that your CSED’s have expired, then it would be your responsibility to contact the Internal Revenue Service and have them deliver you some type of substation to demonstrate the balance has been satisfied. Once you can authenticate the tax liability has been removed, the IRS should issue an official Certificate of Release of Federal Tax Lien or Lien Withdrawal. This information should be requested and is not automatically generated to you.