What Actions Can Extend the IRS Statute of Limitations on Collections?

The length of time the IRS can legally collect a tax debt after it has been assessed is called the Collections Statute Expiration Date, or CSED for short. In general terms, the CSED or the time limit for the IRS on an assessed tax debt is 10 years. Once the date expires, the IRS is barred from attempting any collection action on old tax debts.

It is important to know that some exceptions apply. That is, there are things that will stop the 10-year CSED from running, otherwise known as tolling the statute of limitations.

What extends the IRS collection time-frame?

Filing of any Bankruptcy: The filing of bankruptcy can extend the CSED statute of limitations for as long as the bankruptcy case is pending.

The time period can be around 6 to 9 months for Chapter 7 bankruptcies. However, a Chapter 13 bankruptcy procedure can take up to five years to complete, and sometimes longer.

Living outside the United States: If you leave the United States for a continuous period of more than six months, that absence can toll the CSED clock from running.

So don’t think that you can avoid the IRS collection action and also run out the statute of limitations by hiding in a foreign country.

Offer in Compromise (OIC): If you approach the IRS to get a solution for your tax debt problems, the IRS employee will immediately recommend you to apply for an offer in compromise. But don’t make the mistake of believing that their encouragement is always in your best interest. Since filing an OIC will toll the CSED, the IRS will get more precious time until you can afford to pay tax debts. The IRS loses nothing and you will be back to where you started.

Collection Due Process Appeal: Any timely filed Collection Due Process (CDP) appeal or participation in an appeals hearing process will toll the statute of limitations on collection. However, if your request is treated as an Equivalent Hearing, the CSED will not be tolled even though the IRS can continue collection actions.

Voluntary Statute Extensions: The IRS and the taxpayer may agree to an extension of the normal period of limitations. Though rare, this happens when the taxpayer enters into an Installment Agreement with the IRS. But this voluntary extension cannot exceed six years.

Fraudulent Cases: You can’t defend an IRS legal suit on collections simply by arguing that the time limitations has run out if your own fraudulent action prevented tax collection in the first place. This is a strange one, but it happens sometimes.

Requesting an Installment Agreement: The CSED is tolled while the IRS considers your Installment Agreement Request.

Assets under the Court’s Custody: The CSED can either be tolled or extended when your assets are in the control or custody of a court. Wrongful levy – any mistake on the part of the IRS – can also suspend the CSED.