Randolph Law Firm, P.C.

Tax debt can only be collected for 10 years, experts say

A little-known loophole in American tax law means the Internal Revenue Service only has 10 years, give or take, to collect a taxpayer's outstanding debt. While this is by no means a good reason for Nevada residents to ignore tax debt, it does provide interesting background about how tax law affects individuals. It can be very valuable to understand how these tax laws operate when dealing with an audit or other IRS interaction.

The expiration date for the collections statute is referred to as the CSED (Collection Statute Expiration Date). It is dated 10 years from one of several IRS assessment dates, including the date a tax return is filed, a date a taxpayer signs the auditor's report, or the date the taxpayer appeals a report. In certain cases, this date can be extended.

A number of specific conditions must be met in order for the CSED to be extended by the IRS, including a bankruptcy filing, an Offer of Compromise filing, should a taxpayer sign a waiver of extension, and should a taxpayer spend a considerable amount of time outside IRS jurisdiction. It has been reported in the past that the IRS sometimes miscalculates the CSED, which means it can be very important to verify the date. As the date approaches, the IRS often intensifies its collection efforts, even going so far as to allegedly mislead taxpayers into signing extension waivers.

Tax issues, particularly as they regard tax debt, have the capacity to be very complicated. It is rarely in the best interest of a Nevada resident to approach a negotiation with the IRS without comprehensive knowledge of state and federal tax law. When it comes to paying off tax debt, it is always best to be informed and prepared for your responsibilities, and to know your rights.

Source: Winter Park/Maitland Observer, "IRS has only 10 years to collect tax debt," Peter Pappas, June 12, 2013

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