Tax law states that the length of period for collection after assessment of tax liability is 10 years. Each tax assessment has a Collection Statute Expiration Date (CSED), also known as an Expiration of Statutes.

The collection statute expiration date is generally the window with which the IRS legally has the right to collect a taxpayer’s tax balance. The legal framework includes 10 years from the date of assessment to have the right to collect a tax issue. However, if the taxpayer never filed your tax returns, the Expiration of Statutes will not begin until the IRS creates a Substitute for Return (SFR) in your name. To put it simply, if the IRS requests you to pay dues older than 10 years, their organization has passed the due date. If you find yourself in either of these circumstances, contact a tax professional immediately. Justice lies within the law, and the government should abide by its legal frameworks.

1. Automatic / Summary Assessment – Traditionally when a taxpayer files their tax returns with any tax liability and/or payments made, they are consenting to the IRS’ automatic assessment. If a balance is due, the IRS will mail a notice of liability that will immediately take effect. A summary assessment may also occur in the event of penalties stemming from the taxpayer’s return. These penalties are often received as a result of
late filing.

2. Deficiency Assessment – This assessment will be sent out following a long administrative and judicial process determining the taxpayer’s accurate liability. The process begins with the IRS reviewing a tax return, or filing one in the event of a delinquent return, and ends with either an agreement between the two parties or a court decision. In the event of 30-day letters culminating in a 90-day Notice of Deficiency, the IRS is not allowed to assess or collect any of the money owed by the taxpayer until the matters of deficiency have been resolved.

3. Jeopardy / Termination Assessment – Rarely used by the IRS, in the event the government has reason to believe the collection of tax liability is in “jeopardy” due to the taxpayer trying to leave the country or hide their money, the IRS has permission from Congress to skip the standard assessment and collection protection rights. This means the IRS has the power to assess and collect withheld tax liability in an accelerated process, while the taxpayer is forced to wait and challenge the decision after the fact. But as stated earlier, this only happens on rare occasions due to the fact that the evidence required to overrule the government’s standard procedure is difficult to present and prove.

Income tax is one of the most common types of taxes that individuals and businesses must contend with. Here’s how the CSED IRS applies to income tax:

Individual Income Tax

For individual income tax, the CSED is generally calculated based on the tax assessment date, which is usually the due date of the return or the date the return was filed. However, several factors can affect the CSED for individual income tax:

Business Income Tax

Business income tax, including corporate income tax, follows a similar CSED calculation as individual income tax. It is generally based on the assessment date and subject to the same factors like extensions and audit periods.

Payroll tax, which includes Social Security and Medicare taxes withheld from employees’ wages, has its own set of rules regarding the CSED:

The Trust Fund Recovery Penalty (TFRP) is a component of payroll tax that can lead to personal liability for individuals responsible for withholding and remitting payroll taxes. The CSED for TFRP is determined by the assessment date, which occurs when the IRS identifies the liability. Unlike income tax, TFRP does not allow for extensions.

Estate tax is a tax imposed on the transfer of a deceased person’s estate. It has unique considerations when it comes to the CSED:

The CSED for estate tax is generally triggered by the filing of the estate tax return (Form 706). The clock starts ticking from the date of filing. Extensions may be granted for filing the return, but these extensions do not affect the CSED for paying the tax.

Now that we’ve explored how the CSED applies to income tax, payroll tax, and estate tax, let’s highlight some key differences among these tax types:

Maintaining meticulous and accurate financial records facilitates smooth tax filing and can safeguard freelancers in instances of audits or financial discrepancies.

Calculating the CSED is not a straightforward task, as it depends on various factors and circumstances surrounding the tax debt. Typically, the calculation starts from the date the tax liability was assessed. Several key points to consider in the calculation of CSED include:

Understanding the significance of the CSED is crucial for both taxpayers and the IRS:

The CSED for estate tax is generally triggered by the filing of the estate tax return (Form 706). The clock starts ticking from the date of filing. Extensions may be granted for filing the return, but these extensions do not affect the CSED for paying the tax.

The Collection Statute Expiration Date gives the IRS a decade to legally collect a tax balance. If you are wondering how to extend the due date, below are a few options:

In some cases, the IRS may ask you to extend a given time period of CSED. At that time, the IRS has no right to gather tax issues. The IRS, for example, extends the CSED when taxpayers request innocent spouse relief; a collection due process hearing; apply for an offer in compromise; file for bankruptcy; or was abroad for six months or more. Any tax problem assessed as a result of a tax fraud conviction will not expire.

The Internal Revenue Service has many programs that taxpayers can utilize to their advantage. The Collection Statute Expiration Date is just one example of these programs. Many people enter negotiations with Internal Revenue Service personnel in hopes to get relief from their taxes. Usually, the Internal Revenue Service will take advantage of an average taxpayer because they know that the taxpayer does not know the specific rules or laws of IRS collections. If you are struggling to get ahead of any unpaid tax issues from the past few years, we strongly suggest you contact a professional tax lawyer to aid you in the most accurate calculation of your liabilities owed to the IRS. One of our experienced tax attorneys can help you, and any other taxpayers in need, understand these programs. It’s important to remember when discussing your IRS tax issue plan of action with a tax professional to avoid doing anything that may lead to the IRS extending the statute beyond its current timetable.

For more information about the various statutes of limitations, the IRS must abide by, contact Victory Tax Lawyers at 866-640-0640 or send an email to info@victorytaxlaw.com. We will help you resolve your tax disputes with the Internal Revenue Service because we have dedicated ourselves to understanding and comprehending the IRS tax laws in order to help uninformed taxpayers receive relief from the IRS back taxes they deserve.