Ten Years After - The IRS Collection Statute of Limitations

Overview


I was a youngster for the Woodstock Music and Art Fair commonly known as Woodstock took place in Bethel, NY between August 15-18, 1969. Frankly, I never knew anyone growing up in the Canal Zone that attended in person. The documentary actually made it to the Balboa theater in 1970. I have a brother-in-law from Queens that attended as a fifteen year old. Parental supervision? To his credit and unlike many attendees, he can actually remember it!


The British Group Ten Years After was a talented rock and blues that played at Woodstock. Their song I'm Going Home was one of the better performances at Woodstock. Santana also performed at Woodstock and performed in Panama in 1970. It was the only rock performance of any top group that ever came to Panama that I am aware. Hence, all Zonians were Santana fans. I digress! The connection between the band and this article is the ten year IRS statute of limitations for collections. This article outlines the ten year statute of limitations for collections and its nuances.


IRS Ten Year Statute of Collections


The collection statute of limitations begins to run on the date of assessment. From that date, the IRS has ten years to levy or commence a court proceeding to collect the assessed tax liability. If the IRS determines there is a deficiency in the amount of tax, the IRS must send a notice of deficiency to the taxpayer before it can assess the deficiency. The Tax Court has jurisdiction to redetermine deficiencies in such cases if a petition is filed within 90 days after the notice is mailed. If the taxpayer does not file a petition, the IRS can assess the tax shown in the notice at the end of the 90-day period. If the taxpayer files a petition, the IRS cannot assess the tax until the decision of the Tax Court has become final. When the decision becomes final, the IRS can assess the amount of tax as redetermined by the decision of the Tax Court. §6215(a). If the taxpayer appeals the decision of the Tax Court, the IRS can assess the tax immediately, even though the Tax Court decision is not yet final, unless the taxpayer files a bond to stay assessment and collection. An assessment made in violation of these restrictions is void.


In order to collect a tax, the IRS must first assess the tax, or must bring a court proceeding to collect the tax without assessment, before the statute of limitations on assessment expires. In most cases, these actions must be taken within three years of the later of: (1) the date on which the return is filed; or (2) the unextended due date of the return. Even if the taxpayer agrees to the deficiency, the IRS cannot assess the deficiency after the statute of limitations on assessment has expired.


In general, the collection statute of limitations is suspended for the period the IRS is prohibited by law from collecting and for the period agreed to by the taxpayer. The collection statute of limitations can be suspended and extended by agreement, by filing an offer in compromise, by filing a bankruptcy petition, by filing a collection due process appeal, by being out of the country for a period exceeding six months, and for the period during which an installment agreement proposal is under consideration by the IRS.


Most of the assessment and statute of limitations information can be determined from the taxpayer's transcript of account. The transcript can be obtained from the IRS by oral request or by filing Form 4506-T. While the transcript includes only the account history, the actual record of assessment can be obtained by making a FOIA (Freedom of Information Act) request.

A taxpayer is not without defenses to the IRS’ collection of the outstanding tax liability. Some of these options the following:

  1. Determine whether the tax was properly assessed;

  2. Ensure that the statute of limitations on collection has not expired. The IRS determination is frequently incorrect.

  3. Determine whether innocent spouse relief may be available;

  4. Request a Taxpayer Assistance Order where the collection actions are causing a hardship;

  5. Request a new audit or audit reconsideration ;

  6. Determine if an injunction precluding collection is available;

  7. Make an offer in compromise;

  8. Enter into an installment agreement; and

  9. File a petition in bankruptcy.

Summary


For many (read Most) taxpayers, mail from the IRS of a tax deficiency is almost as bad as receiving notice in the mail of your expected date of death. Save yourself the heartache,

and call a tax professional who can relieve you from having to deal with the Grim Reaper for Tax Purposes, the IRS. Let our office become your advocate in dealing with the IRS while identifying the financial and tax solution for relieving your tax pain. It does not have to be so hard!


The taxpayer is not without defenses to the IRS’ collection of his outstanding tax liability. In examining which defenses are available, the taxpayer should consider the following options:

  • Determine whether the tax was properly assessed;

  • Ensure that the statute of limitations on collection has not expired;

  • Determine whether innocent spouse relief may be available;

  • Request a Taxpayer Assistance Order where the collection actions are causing a hardship;

  • Request a new audit where there has been an arbitrary assessment because of the failure of the taxpayer to participate in the audit;

  • Determine if an injunction precluding collection is available;

  • Make an offer in compromise;

  • Enter into an installment agreement; and

  • As a final option, file a petition in bankruptcy.



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