The CSED -- Collection Statute Expiration Date -- gives the IRS only 10 years to collect debt relating to back income and payroll taxes. If criminal activity or fraud is alleged, the 10 year statute of limitations does not apply. The IRS writes off tax debt that is not collected before the CSED.
Statute of Limitations
The statute of limitations relating to the IRS collecting debt in the form of back taxes expires 10 years after the date of assessment. The date of assessment is often close to the date the taxpayer filed the taxes for which the debt is owed. The law allows the IRA 10 years to collect taxes, penalties and interest from taxpayers. After the statute of limitations has passed, the taxpayer does not owe the debt, unless an exception applies.
Date of Assessment
The date of assessment for taxes occurs when an IRS employee signs a particular form claiming that an individual taxpayer owes taxes to the IRS. Though the form is typically signed when the return is filed, the IRS has a three-year time frame from the date the return is filed or from the due date on the return to assess, or calculate, the taxes.
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Exceptions to the 10-year statute of limitations imposed on the IRS to collect debt can extend the 10-year time frame. Exceptions are specific events that occur during the 10-year period. Exceptions that extend the statute include the taxpayer filing personal bankruptcy or an offer in compromise with the IRS. If the taxpayer signs a waiver allowing the IRS more time to collect the debt or files IRS Form 12153-CDP -- a request for a collection due process hearing -- or files IRS Form 911-ATAO -- an application for taxpayer assistance -- the statute also can be extended.
The IRS may continue to collect the tax debt from taxpayers after the 10-year statute of limitations has passed unless the taxpayer informs the IRS in writing of the expiration. Taxpayers can request copies of their tax transcripts to determine the assessment date of the tax liability. After determining that the statute of limitations has expired, taxpayers should notify the IRS of the CSED and reiterate that they are no longer obligated to pay the tax debt.