Sam Brotman, JD, LLM, MBA December 16, 2013 5 min read

The Collection Statute Expiration Date

The Collection Statute Expiration Date (CSED) falls under Section 19[1] of the Internal Revenue Manual (IRM). The CSED refers to the idea that every tax assessment has a statute of limitations. The rules and procedures for the CSED are governed by statute, namely section 6502(a) of the Restructuring and Reform Act of 1998 (RRA 98).

According to the IRM, each tax assessment has a collection statute expiration date, or CSED (IRS.gov, “Part 5. Collecting Process, Chapter 1. Field Collecting Procedures, Section 19. Collection Statute Expiration,” 8/17/2013). “Internal Revenue Code section 6502 provides that the length of the period for collection after assessment of a tax liability is 10 years. The collection statute expiration ends the government’s right to pursue collection of a liability” (“Collection Statute Expiration”). However, due to a number of events, the statute of limitations may be extended. Events are specific to the taxpayer’s response.

Tolling the CSED

If the taxpayer responds by filing an offer-in-compromise, bankruptcy, application for a Taxpayer Assistance Order (TAO), a voluntary waiver of the statute of limitations, and a collection due process appeal, then all of these actions and related ones will extend the collection statute of limitations for different extension and/or tolling periods (“Section 19. Collection Statute Expiration”). By signing a waiver of statute of limitations, the CSED can then be extended by no more than five (5) years. The IRS can only request that you sign the waiver if it is in conjunction with a filed installment agreement.

Bankruptcy

If you file for bankruptcy, because of the automatic stay imposed by the proceedings, the CSED is generally suspended. “Even if the suspension of the CSED under IRC 6503(h) no longer applies, the CSED still may be suspended when substantially all the debtor’s assets remain in the custody or control of the bankruptcy court under IRC 6503(b)” (“Section 19. Collection Statute Expiration”).

The CSED is extended throughout the duration of the bankruptcy proceedings plus six months. It is extended on non-dischargeable tax liabilities, from the date of filing for bankruptcy to the date the bankruptcy is either discharged or dismissed. The extension does not include tax debt discharged in the bankruptcy.

Offer in Compromise

For taxpayers that file an Offer in Compromise (OIC)[2], the CSED will be extended for its duration plus an additional 30 days. Under certain provisions, the IRS is limited from levying and the CSED will be suspended while an Offer in Compromise is pending; will be suspended for 30 days after the rejection of an OIC; and will be suspended during the period of an appeal of a rejection.

Out of Country Status

If a taxpayer is currently residing outside of the U.S. for a continuous period of at least six months, under IRC 6503(c), the statutory period of limitations on collecting the tax owed, after assessment, will be suspended. “To make certain that the Government has an opportunity to collect the tax after the taxpayer’s return, the period does not expire (where the taxpayer has been out of the country for six months or more) until six months after the taxpayer’s return to the country” (“Section 10. Collection Statute Expiration”). In this case, the CSED can be suspended for a very long time.

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[1] Part 5. Collecting Process, Chapter 1. Field Collecting Procedures, Section 19. Collection Statute Expiration: http://www.irs.gov/irm/part5/irm_05-001-019.html.

[2] The subject of Offer in Compromise is further discussed in Part 3 of Chapter 7: What If I Can’t Pay in Full?

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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