The collection statute expiration date (CSED), or the COSED are the time limits the IRS has to collect on your debt. Yes, Federal taxes do expire but Maryland State taxes do not. Federal taxes expire after a ten-year period from last assessment. Meaning that back taxes from 2006 and the IRS’s ability to collect on those taxes does not necessarily expire in 2016. Also, there are certain actions or events that may cause the statute of limitations to stop, hold, or extend.
What things extend the CSED?
The IRS has only ten years from the last date of assessment to collect on a tax liability. This generally happens up to three years after your file your return. So if you file late or don’t file at all, the clock doesn’t start ticking. In addition there are other events or assessments that can add or stop time on your CSED. Here are a few common things that may change your CSED dates:
- Innocent Spouse
- TAS 911 Form
- Military deferment
- Living outside US continuously for at least 6 months
- Tax court
- Waiver extension request by the IRS (usually during IA or OIC)
The Bottom Line
The CSEDs are very important to most tax controversy cases. If you are making an action on your case, review it or have your attorney review the potential tolling events. Sometimes waiting out possible IRS actions is your best bet during the collection phase. In many instances the training at IRS is not uniform and many officers have been inaccurately reporting the CSED dates; it is our best advice to have a tax professional review the accuracy. Once the CSED runs out, the IRS is prohibited from any further collection activities. This means you may have escaped paying a large bill just by learning the CSED rules.