The tax debts that are to be recovered from taxpayers have to be collected by the IRS before a particular date. This date is called the Collection Statute Expiration Date. If by this date the IRS fails to collect the outstanding tax amounts from any taxpayer, the tax debt expires.
According to this, the IRS no longer holds the right to recover the tax debt amount from the amount where the collection statute expiration date has already passed. An important point in this system is the fact that the tax debt for every year has its own CSED because in most of the cases the outstanding payments are not for a single year only.
So, as and when the taxes start accumulating year by year, the CSED is applied to the tax debt that was added for a particular year.Generally, the CSED is 10 years from when the taxes were assessed. The term assessed means the date on which the tax return of a certain taxpayer was reviewed by the IRS, the outstanding tax debt was calculated according to the review and then was uploaded on its systems.
There are some situations where the Collection Statute Expiration Date for your tax debt can be extended.
- If a waiver of statute of limitation is signed by you, there will be a maximum extension in your CSED. Until and unless the waiver is in combination with an installment agreement, the IRS has been limited to ask you for this waiver.
- If you stay away from the country for a period of more than 6 months, the CSED can be increased by the IRS.
- There is an extension in the CSED in case you file for a bankruptcy. It is prolonged for a period until the proceedings regarding the bankruptcy are over and an additional 6 months. This duration is the time span between the date when the bankruptcy was filed and the date when it was discharged. This excludes the tax debt which would have been discharged in the bankruptcy.
- If suppose a taxpayer files for an application to gain assistance from a problem resolution officer, the CSED is extended by a period which is taken for the consideration of the application.
- The CSED is also extended when you apply for an offer in compromise with the IRS. The duration of this extension is the time span of the offer plus an additional 30 days.