The IRS does not have an unlimited amount of time to collect any tax debt that you may owe. They are subject to a statute of limitations that acts as a deadline for them to collect from you. They must undertake all collection efforts prior to the expiration of the statute of limitations, or else they lose the right to seek repayment of the back taxes. From your standpoint, you should never count on the IRS not taking action to collect on tax debt because it can cost you a significant amount of money.
A New York tax lawyer can help you get current on your tax return and deal with the IRS if you have any issues. Contact Thorgood Law Firm today for more information.
What Is the CSED in Your Tax Case?
The IRS deadline for collecting taxes that you owe is different from the limitation on the timeframe to conduct an audit or refer you for criminal tax prosecution. Once you have filed your tax return, and you owe taxes, the IRS has a definite time period in which to collect the taxes. The time clock can also begin to run on the date that the IRS has made a substitute tax return, if you did not file one in the first place.
The statute of limitations is ten years from the time that you filed your return, or the IRS substituted the return that you should have filed with one of their own.
When the CSED May Be Extended
There are certain events that can cause the statute of limitations to be paused or extended. The IRS may have additional time to collect when the following has occurred:
- You have filed for bankruptcy (while you may still owe taxes at the conclusion of the bankruptcy process, the IRS cannot take any collection action during the pendency of bankruptcy because there is an automatic stay in effect).
- You have made an offer in compromise to the IRS.
- You agree to have the CSED extended (such as during an audit).
- You have filed an appeal of the amount that the IRS says you owe
- You have entered into a certain type of installment agreement.
- You lived outside of the United States for at least six months.
For each of the above circumstances, the IRS had some type of reason why it was either prohibited from collecting taxes or there was something that made it more difficult. Accordingly, the law gives the agency more time to collect because it did not have the benefit of the full ten-year period.
There May Be Disputes About the Actual CSED
You and the IRS may not agree on the actual date when the statute of limitations began to run. The agency will obviously try to use the date that is most favorable to them and allows for the greatest possible collection time. The IRS may claim that there were certain events in the ten-year timeframe that tolled the statute of limitations and gave them more time to collect from you.
The IRS May Become Aggressive When the Statute of Limitations Is Near Expiration
The IRS has its eyes on the same exact clock as you when it comes to the statute of limitations. The agency knows when they will no longer have the ability to collect from you. Accordingly, the IRS may increase its collection efforts towards the end of the statute of limitations. The agency may use all collection means at its disposal to try to get some money from you, while it still has the ability to enforce the tax debt.
When this occurs, you must make a decision about whether to try to pay the IRS or wait out the statute of limitations. The latter is never a decision that you should make on your own without the help of an experienced tax attorney. There are risks of ignoring repeated letters from the IRS, and you can make your own situation worse. However, there are some tactics that you might use to increase the chances you can potentially “wait out” the IRS. A New York tax attorney can review your situation and help determine the best course of action for your situation.
What Should I Do When the CSED Is Nearing an End?
It is crucial that you get everything right when the CSED is drawing to a close. You do not want to make any mistakes that could somehow revive a tax debt that you may no longer owe. One of the complicating factors is that you may owe taxes from multiple years, and there can be several CSEDs that are running concurrently.
Here are some things that you need to be mindful of during this time:
- You may still want to consider an Offer in Compromise because lapsed tax debt can still cause you to not get tax refunds in the future (even though it tolls the statute of limitations)
- You need to carefully consider whether to pay when the IRS is demanding money in light to the possible expiration of your tax debt
- You want to make sure the IRS’s calculation of the expiration date is accurate
- If you have multiple years of taxes owed, plan carefully
The best course of action that you can take is not to try to navigate the situation on your own. Hiring a tax lawyer is a worthwhile investment when you are facing a difficult situation.
Contact a New York Tax Lawyer
If you are facing IRS collection efforts or worried about the Collection Statute Expiration Date on your tax debt, the experienced tax resolution lawyers at Thorgood Law Firm can help. We guide clients through complex IRS rules, verify CSED timelines, and create strategies to stop aggressive collections while protecting your rights.
Contact Thorgood Law Firm today by filling out an online contact form or by calling us at (212) 490-0704 to safeguard your finances. We are located in New York, and we maintain a national tax law practice.
