Today we welcome first time guest blogger Patrick Thomas. Patrick is an ABA Tax Section Christine A. Brunswick Public Service Fellow working at the Neighborhood Christian Legal Clinic in Indianapolis, Indiana. As a Public Service Fellow he receives a stipend for two years to work assisting low income taxpayers. Patrick was very generous with his time in assisting in the review of the 6th Edition of Effectively Representing Your Client Before the IRS which becomes available this month. He writes today on a topic that does not often receive attention but leaves both the IRS and practitioners confused – calculation of the statute of limitations on collection. Keith
It is a basic concept of law that once a statute of limitation has passed, no action barred by the statute may take place. Yet, as noted in the National Taxpayer Advocate’s 2014 Annual Report, the IRS often engages in forced collection action after the Collection Statute Expiration Date (CSED) has passed. Of course, the IRS does so not because they intend to flout the law; rather, Service employees may mistakenly apply the complicated rules by which the CSED is calculated. Indeed, the Annual Report, citing a 2013 TIGTA audit, indicates that “21 percent of CSED calculations were not accurate” in the CDP context. Given the volume of CDP cases each year—59,470 in FY 2012, including CDP and Equivalent Hearings—the IRS was making incorrect CSED calculations in over 10,000 CDP cases each year. Certainly, the problem is not endemic to Appeals alone, and likely affects many more cases every year.
read more...The misapplication of the CSED in the CDP context is the most critical, however, as this is often the sole venue where a miscalculated CSED can be resolved. Even where the CDP officer upholds a miscalculated CSED, the Annual Report indicates that the Tax Court often cannot exercise independent review of the Settlement Officer’s decision, restricting itself instead to the administrative record and an abuse of discretion standard of review. The National Taxpayer Advocate accordingly calls on Congress to clarify that the Tax Court may always exercise de novo review of this issue, as it is fundamental to that basic concept of a statute of limitations. I wholeheartedly agree with the NTA’s recommendation. To that end, I believe a review of the CSED rules, and the ease with which they can be misapplied, would be helpful.
Normally, the CSED occurs 10 years after the date on which the tax is assessed. IRC § 6502(a)(1). However, various circumstance may “extend” the CSED—i.e., these circumstances push the CSED date forward in time. The Code speaks to “suspension” of the period of limitations, during which the CSED “clock” stops running. Such suspension periods lead to the extension of the CSED. (The interchangeability of these terms in the IRM, e.g., IRM 5.1.19, Collection Statute Expiration, may contribute to confusion among Service employees). The most often encountered periods include:
- Bankruptcy: From the date of filing the petition until the date of discharge, plus 6 months. IRC § 6503(h).
- Pending Installment Agreement: From the date of the request for an installment agreement, plus appeals, plus 30 days. IRC § 6331(k)(3).
- Termination of Installment Agreement: 30 days from the date of termination, plus appeals. IRC § 6331(k)(3).
- Pending Offer in Compromise: From the date of acceptance for processing of the OIC plus appeals after rejection, plus 30 days. IRC § 6331(k)(3).
- CDP Hearings: From the date of a timely request until final disposition. Additionally, if it is less than 90 days from the CSED, the CSED is reset to 90 days from the date of final disposition. Reg. § 301.6330-1(g)(3).
- Military-related Service in a Combat Zone: The length of service, plus 180 days. IRC § 7508(a)(1)(i).
The taxpayer may also elect to extend the CSED to a particular date, often in connection with an Installment Agreement.
Some examples help to clarify the rules. A tax assessed on 4/15/2015 ordinarily has a CSED of 4/15/2025. A suspension of that CSED for 30 days from 6/1/2020 until 7/1/2020 stops the CSED clock for that period of time; accordingly, the new CSED will be 5/15/2025. Easy enough.
In a more complicated example, let’s say a taxpayer files his 2014 tax return on 4/15/2015, showing a tax liability of $10,000. The taxpayer then files a bankruptcy petition on 5/15/2015, and receives a Chapter 7 discharge on 7/15/2015. The CSED is suspended for the period of the bankruptcy—62 days—plus six months. Accordingly, the new CSED is 12/16/2025. Still fairly straightforward.
The intersection of more than one suspension period at the same time creates the potential for confusion—and ultimately, for miscalculation of the CSED. In a yet more complicated example, let’s take that same bankrupt taxpayer. In the period after his bankruptcy is discharged, he files an Offer in Compromise, which was accepted for processing by the Service on 8/15/2015, to resolve his non-dischargeable $10,000 tax debt from tax year 2014. The CSED “clock” does not run during the 6 months after discharge of the bankruptcy; that is, until 1/16/2016. The OIC filing similarly suspends the clock during pendency of the OIC, and for 30 days after its rejection (for sake of the example, the taxpayer must, unfortunately, have his OIC rejected). Let’s say the rejection occurred on 12/15/2015 (this is about the average time I’m currently seeing for COIC to process Offers in Compromise from acceptance to disposition). Let’s further assume that the taxpayer did not exercise any appeal rights.
Accordingly, the CSED would start running again for purposes of the OIC suspension on 1/15/2016. His new CSED is still 12/16/2025, because the OIC suspension fell entirely during the bankruptcy suspension. The OIC filing does not doubly penalize the taxpayer on the CSED issue. It’s fairly easy to see how a Service employee could confuse the concurrent suspension of the CSED due to bankruptcy and due to the OIC with a rule that would tack on the period of the OIC, plus 30 days, as an extension to the CSED. If that were the case, the CSED would not run until 5/16/2026.
Continue with this taxpayer. He has now successfully flown under the radar of the IRS until December 2025, when he decides to take a job and files a Form W-4 with his employer. The IRS notices the W-4 filing and the wages, and on January 16, 2026, the IRS sends the taxpayer a Notice of Intent to Levy on the wages. The taxpayer timely files for a CDP hearing on February 15, 2026, offering a collection alternative that is, like his old OIC, rejected. But he fails to mention the CSED issue—in fact, he was entirely unaware of its existence. In the verification process, the Appeals officer noticed that the CSED read “5/16/2026,” and after rejecting the collection alternative, decided to sustain the levy. The taxpayer then files a petition in Tax Court, challenging the decision of Appeals. How will the Tax Court rule on the IRS’s clear misapplication of the CSED in this matter (assuming that the taxpayer gets connected with a practitioner who spots the issue)?
Even with clear evidence to the contrary, it may uphold the decision. The Annual Report explains the Tax Court’s standard of review at length: in the opinion of IRS Chief Counsel and some of the Court’s decisions, the Court may only review CSED determinations in a CDP hearing subject to an abuse of discretion standard. What is more, an abuse of discretion review in Tax Court is limited to the administrative record. Therefore, where a taxpayer does not raise the CSED issue in the CDP hearing, the issue is essentially forfeited in Tax Court.
This is clearly a problem for all taxpayers. While many are familiar with the “3 year rule” for amending tax returns or as a bar against examinations, I doubt if 1% of taxpayers are familiar with the CSED as a concept. Even for taxpayers who owe liabilities, the CSED is never publicized in any materials; the IRS will only give you their CSED calculation if you ask for it—if you can get through on the phone. Low-income taxpayers, who often have lower educational attainment, lack access to the Internet, and speak English as a second language, have it even worse. Even if such taxpayers get to the CDP stage (and that’s a big “if”, without the assistance of a Low Income Taxpayer Clinic), how are they supposed to know about—let alone challenge—the CSED?
Without the background knowledge to raise a CSED issue in a CDP hearing, taxpayers—and especially low-income and ESL taxpayers—may unwittingly forfeit a clear bar to collection. Lack of meaningful Tax Court review inappropriately harms these taxpayers. Given the harm and its relative likelihood that the complexity of the CSED rules engenders, the legislative change that the National Taxpayer Advocate recommends is an easy, relatively uncontroversial fix that should be implemented as soon as possible.
About Patrick Thomas
Asking the Taxpayer Advocate for help, by filing a Form 911, also suspends the SOL. But IRS has trouble tracking that also. From the Manual (IRM 5.1.19.3.13):
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Due to systemic programming limitations, the Commissioner decided in November 2003, that Taxpayer Advocate Service (TAS) does not have to input the appropriate IDRS codes to reflect the suspension of the statute of limitations under IRC 7811(d). The program limitations are still in effect; therefore, IDRS codes are not input to show the correct suspension periods for IRC 7811(d) at this time. See IRM 13.1.14,Suspension of the Statutes of Limitation Under IRC§ 7811(d).
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But what I find significant about this comment is the underlying assumption that not only are IRS and taxpayers in adversary positions; IRS and Congress are adversaries as well. Why should legislation be needed to require IRS to do what is fair and correct? What would happen, I wonder, if someone called up the Commissioner and suggested that his organization avoid errors by providing delinquent taxpayers with notices and publications that explain how the date is calculated, and what to do if an error is suspected.
Couldn’t be much more complicated than losing a Tax Court case to a Las Vegas bartender who followed the rules on tip income (Sabolic, TCM 2015-32).
Overlooking Mr. Thomas’s IRS-like confused use of important dates, I don’t see how the CSED issue can harm any practitioner or any intelligent taxpayer.
Initially, anyone facing enforced tax collection will receive IRS Publication 594, “Understanding The Collection Process.” Publication 594 clearly notifies the taxpayer that “[the IRS] can attempt to collect your taxes up to 10 years from the date they were assessed”; it also provides a list of events that can suspend the CSED. Mr. Thomas’s taxpayer thus knows this much for certain: he filed his return in April 2015 and it is now December 2025. If our taxpayer has his wits about him, then he will note that more than 10 years has elapsed between the two dates and, therefore, claim collection action is barred. He will let the IRS figure out what event, if any, may have suspended that 10 year period.
I’ll assume, though, that the IRS has determined a 5/16/202[6] CSED. To me, that is not a problem for Mr. Thomas’s taxpayer.
Both Chief Counsel and the National Taxpayer Advocate are out to lunch on the CSED review standard. How is the question of whether a statute of limitations bars an action anything other than a question of law? As a question of law, the standard of review is de novo.
Ideally, perhaps, the taxpayer should expressly raise the CSED issue at his CDP hearing. Nonetheless, the CSED is part of the “applicable law” subject to the CDP verification process. Appeals must therefore obtain verification of the CSED regardless of whether the taxpayer specifically raised it at his CDP hearing. Almost always, the first time the taxpayer learns about the verification is in his Notice of Determination. In that event, the taxpayer proceeds to petition the Tax Court. In his petition, he raises a statute of limitations affirmative defense to the CSED verification. He needs to only point out the obvious: more than 10 years has passed since the tax assessment. The burden of production will then shift to the Commissioner.
What evidence will the Commissioner produce? An IRS transcript that contains a supposed CSED? That evidence would show merely the IRS’s legal conclusion about what it believes is the correct CSED. A detailed IRS transcript that lists each CSED suspension related event? That evidence, which includes facts, would show that the CSED for Mr. Thomas’s taxpayer has expired. Case closed.
In fact, Mr. Thomas’s taxpayer wins even under an abuse of discretion standard. By definition, an abuse of discetion occurs when an Appeals Officer makes a mistake of law. So if the Appeals Officer determines that levy may proceed when he has misapprehended the application of 26 U.S.C. § 6502(a) to the facts, then he abuses his discretion. Case closed again.
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While Appeals should catch the issue in its review, my experience suggests that it often will not. I also believe the almost all low income taxpayers, most regular and upper income taxpayers and many representatives will miss the collection statute of limitations as well. If no one raises them, the Tax Court will not ordinarily raise them on its own. The comment by Bob Kamman the statute extension that exists in the Code but is nullified by the IRM provides a stark example of the potential for confusion here. Anyone reading the Code who knew that the taxpayer had requested assistance from TAS by filing a 911 would logically conclude that the statute of limitations was suspended for the period of the working of the request yet the IRS by manual provision says never mind we do not have the ability to monitor these requests to keep track of the suspension period Congress says will occur. How incredible! Yet, most taxpayers and practitioners will not even pay attention to this small corner of the statute.
Correctly calculating the statute of limitations on collection has become a challenge to anyone. We welcome Patrick’s look at the issue which we hope will open some eyes and we welcome the comments which bring richness to the discussion. Help us keep the discussion going by commenting in a manner that fosters collaboration.
Improper coding on the masterfile account modules IS a significant problem precisely because it does throw off the CSOL calculation. The most common ones, in my experience, are the unreversed TC 970 AC 043 input when TP makes a formal request for an installment agreement, stopping the CSOL. If the IRS never enters the reversal code, by rejecting the request or implementing the installment agreement, the CSOL remains tolled. The other one is when there are multiple assessments on a module, e.g. original return (TC 150) and audit adjustment (TC 290). Each assessment carries its own 10-year CSOL, but the IRS CSED calculation runs off of the LATEST assessment. So when the CSED for the first assessment is reached, the IRS almost never splits the module or writes off the portion resulting from the first assessment. Rather, they wait until the second CSED is reached before writing off the entire balance. This can cause quite a disparity when there is a long period of time between original return and assessment of an audit adjustment.
Adding further fuel to the fire is when a joint return is filed and only one spouse filed a Chapter 7 bankruptcy. The IRS then creates a SEPARATE master file for the bankrupt spouse, and it’s like pulling hens teeth to get it; a simple 4506-T form will get the non-bk-filing spouse’s account but not the filing spouse’s account. And the non-filing spouse’s account will show both names. Are you confused yet?
Gerald – I’ve known about the other spouse’s liabilities using the non-master file transcript., and have used it for years.
But recently I’m thinking the IRS may be eliminating that transcript.
Any suggestions on how to get that information?
– Morgan King
I failed to file from 2000-2004 and the irs did a substitute for filing and I was paid a visit by an agent. I subsequently filed returns and after some back and forth with visits to the local irs offices with corrected returns. I do not recall the actual dates but all the returns were analyzed and corrected or accepted at the same approximate time. Now however I have found my CSED’s are from 2016-2019. I am puzzled as to how those CSED dates could be so far apart considering I filed returns and corrected subsequent returns within months of each other. Can the irs delay initiating the CSED to give itself additional time to collect? Or is the irs obligated to start the 10 year clock when it receives my corrected returns? All the CSED dates should be fairly close according to my recollection.
Assuming that the returns you filed, in response to the SFRs, showed lower tax liabilities than on the original SFRs, I believe you will find that the CSED clocks are running from the assessment dates on the SFRs.
is there an irs form to complete in order to get my csed date or is there a number to call them by phone with more than basic questions where someone can give you a csed date over the phone ?
Artie Scharf, I welcome response.
I have three IRS liens, all are form 668 (Y)(c) self releasing. Lien#1 last date for refiling was 9/3/2013 but I haven’t received anything from the IRS regarding the release. It’s my understanding any communication on my part regarding the lien can risk the suspension or refiling of the expired lien. Is the IRS required to notify me if a suspension of the CSED has occurred or is there another method I can use to get all information regarding why I haven’t received the release without trapping myself into a suspension or refiling of the original lien CSED.
Lien #2 has the same issues, however the assessment date was 3/13/2006 the CSED is 4/12/2016 but the NFL wasn’t issued until 5/22/2012. Is this lien also overdue for self release?
Lien #3 CSED 8/1/2017 is small and easily paid after the other two are officially released.
All three liens are attached to my house and therefore leaving us in limbo when it comes to selling. We are stuck for now.
The issue is very complex as demonstrated by the small error in the authors original example. example. The example starts with a taxpayer filing s return on April 15 and makes on CSED computations based on an original CSED of 10 years from the filing date. The filing date is not relevant to the correct CSED which is 10 years from the date of assessment. Assessment usually occurs about 3 weeks after filing.