Having a Correct Statute of Limitations Date on the IRS System

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Chief Counsel Advice 2017040416063446 points to an error in the current IRS calculation of the collection statute of limitations.  The advice concludes with a statement that the author of the relevant IRM provision is “open to revising” the IRM and related exhibit in order to clarify the correct time frame.  This is a rather casual statement regarding something that matters a great deal in certain circumstances.  While it’s nice to learn that the IRS is open to having the collection statute calculated correctly on its system, I would hope it would be desperate to ensure the accuracy of its systems, because otherwise many challenges to its calculations will result.


Guest blogger Patrick Thomas wrote about the collection statute of limitations previously and the difficulty in calculating this period.  His post includes links to studies by the National Taxpayer Advocate and the Treasury Inspector General for Tax Administration finding that the IRS regularly makes mistakes in calculating the collection statute of limitations.  Les wrote about a case the IRS lost because it incorrectly calculated the collection statute of limitations including the suspension triggered by installment agreements.  The recent CCA points to one of the difficulties and strongly suggests that the IRS current system incorrectly calculates the collection statute of limitations.  Yet, the author of the relevant section of the internal revenue manual governing the calculation of the statute of limitations is merely “open to revising” the manual.

The problem identified in the CCA concerns installment agreement; however, it is a potential problem for many of the IRS systems.  When a taxpayer requests an installment agreement, the statute of limitations on collection gets suspended for the period of time the IRS considers the IA because the IRS is prohibited by IRC 6331(k)(2)(B) from levying on a taxpayer’s property while the IA offer is pending and “if such offer is rejected by the Secretary, during the 30 days thereafter (and, if an appeal of such rejection is filed within such 30 days, during the period that such appeal is pending.)”

Because the IRS wants to make sure that it does not levy if the taxpayer has requested an appeal during the 30 day period, it builds 45 days into its system before it takes collection action after rejecting an IA.  This reasonable decision, which exists in other situations than just the IA, bleeds over into the way the IRS system now calculates the collection statute of limitations.  Instead of suspending the statute of limitations on its system for the period the IA is pending plus 30 days, the statutory time period of suspension, the IRS system suspends the statute of limitations for the period the IA is pending plus 45 days, which includes an extra 15 days for the administrative but not statutory period of suspension.  This extra 15 should not appear in the calculation of the statute of limitations but does.

Someone at the IRS noticed the problem and brought it to the attention of Chief Counsel’s office who, in turn, brought it to the attention of the person with the IRS responsible for setting the time frames on the collection statute of limitations.  The casual response does not leave me with a comfortable feeling that the problem will soon be fixed or that the person is scouring the system to find other instances of the same problem.  Yet, there are times when the IRS takes collection action at or near the last day of the collection statute of limitations.

The timing issue I encountered most often when working for Chief Counsel involved the filing of collection suits.  Department of Justice Tax Division attorneys burdened with many cases and accustomed to working with deadlines routinely filed collection suits very close to the statute of limitations on collection.  They rely, or at least pay attention to, the collection statute of limitations date provided to them in the suit letter by the Chief Counsel attorney who frequently relies on the collection statute of limitations date provided by the client.  Here is one example of how that date is routinely calculated incorrectly.  I suspect there are many others and the earlier work referenced by the NTA and TIGTA would attest to that fact.

The more suspension periods Congress creates the more difficult it is to correctly calculate the statute of limitations, but the IRS must build a proper system or it will routinely seek to collect from taxpayers who no longer owe the tax.  Doing so would violate the taxpayer bill of rights and just be wrong.  The IRS should not be casual about getting the statutory periods correct.  This should be a high priority.


  1. This problem becomes multiplied when the transcript shows that your taxpayer/client has had a bankruptcy , a defaulted installment agreement (or two) and maybe even a prior CDP and/or OIC. An extra 15 days here, an extra 15 days there, and pretty soon this could be the difference of a month or more in the calculation of the SOL. It is little wonder that the IRS and taxpayers rarely agree on when the statute expires. And if the IRS believes they have longer to collect, it is my experience that they will do so, leaving it to the taxpayer to spend the money trying to show that collection is inappropriate.

  2. Charles Markham says

    This issue of the TC971 043 “Installment Agreement Pending” also gives rise to another issue. What happens when a taxpayer requests an IA and then as happens in so many circumstances, just kind of “flakes off” and the matter kind of drifts sideways. It shouldn’t, but as a practical matter it does.
    As a practitioner, I have seen numerous ‘unclosed” “Installment Agreement Pending” codes on transcripts. Has the CSED been running the entire time? In theory, it would seem the answer is yes. In practicality, the answer is it should have been, as long as the Service as actively considering an IA. Absent a closing code, these TC971 043’s should “self-close” after a period of time of, say, 60 days, as no IA is actively considered for many months that amount of time without another action occurring.

    Golly, I sure hope the IRS is open to addressing these permanently pending Installment Agreements, too.

  3. Ken Weil says

    And while we are at it, why can’t the CSED be on the account transcript. It is ridiculous to have to call and ask.

    Ken Weil

  4. Lavar Taylor says

    If enough money is at stake and the client has kept records (I know, finding this combination of facts is like finding a hen’s tooth), it is not very difficult to demonstrate that IRS transcripts are often from the historical fiction section of the library, not the non-fiction section, as they should be. The worst case I have ever seen involved a transcript entry for an alleged Taxpayer Assistance Order that supposedly extended the collection SOL for 8 years. Clients had never been anywhere near the Advocate’s Office. Because the clients had records, IRS accepted an OIC based on doubt as to liability for next to nothing with respect to a very large liability.

  5. Richard Caruso says

    It is clear, the IRS makes mistakes. One problem with seeking justice is the prohibitive cost. Perhaps it might bode well for tax attorneys to provide copies of legal documents that pro se or esl litigants could hold their own in court. Esp. Rogs!

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