NTA Highlights Errors in IRS Calculation of Collection Statute of Limitations

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We blogged previously on the problem of properly computing the collection statute of limitations here, here, here, here and here. Calculating the statute of limitations on collection has become quite difficult. The National Taxpayer Advocate (NTA) has just blogged on the subject making it clear not only that relying on the IRS calculation of the collection statute of limitations (CSED) might be unwise but highlighting again the difficulties in this area.

The NTA identifies five situations in which a computer glitch at the IRS causes the IRS to improperly calculate the CSED. Not surprisingly, the problems center on cases in which the taxpayer has entered an installment agreement (IA). When IAs start, end, restart, etc. can create problems in determining which can translate into problems in calculating the impact of an installment agreement on the collection statute of limitations.

The NTA identifies five situations with problems:

  • Multiple pending IAs with only one corresponding rejected IA determination;
  • One pending IA and one approved IA where 52 or more weeks have passed;
  • Multiple pending IAs with one approved IA, where 26 or more weeks have passed;
  • On pending IA with one rejected IA, at least 52 weeks later; and
  • One pending IA, with no other action on the IA request for at least 52 weeks.

The IRS agreed to review the cases in situation 3) above. The NTA cites to an unpublished report in which the IRS finds that 83% of the CSEDs on its system incorrectly identified the last date to collect. Then the NTA says that she believes the number of wrong CSEDs in the group is higher than stated in the unpublished report. By this point you should have a high level of discomfort with what the IRS may tell you about the CSED.

The NTA seeks to have the IRS audit all five of the identified areas of problem and to notify all impacted taxpayers. These taxpayers may have had money collection from them after the expiration of the statute of limitations. Most of the remainder of the post explains the remedies available to those who have wrongly overpaid their taxes. While understanding the remedies available certainly carries importance, my main take away from the post concerns the extremely high error rate in the group of identified cases and how that reinforces my general concern about the ability of the IRS to correctly calculate the CSED.

Comments

  1. If it weren’t for sovereign immunity this would make for a whopper of a class action lawsuit.

  2. John R. Dundon II, EA says:

    As a practitioner in the trenches estimating the CSED is a remarkably uncertain process, so many variables.

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