Collection after assessment of a tax liability is defined in the Internal Revenue Code, Section 6502. Here it indicates that the government has the right to pursue collection of tax liability for a period of ten years after the assessments have been made. This is very good news if you, or somebody you know, have owed a tax balance for several years, because the statute may be expiring soon. However, if you recently accrued a tax balance, the clock just started.
When do the Statutes Begin Running?
When a taxpayer, whether it is a business or an individual, has a tax balance assessed, the collection statute begins. This includes when an original tax return is filed and processed, when a tax return is filed by the IRS as a substitute for return (SFR), and after an audit and additional assessments are put onto an account. If there are any tax assessments made on an account, even after an original return is filed, then the collection statute begins running on the date of the most recent assessment. Generally, at the beginning of the collection period, the Internal Revenue Service will file a federal tax lien to protect its interest in the tax amount due. During the statutory collection period, the IRS can take enforcement action such as bank levies, wage garnishment, or in extreme cases, asset seizure.
Suspension of Collection Statutes
In certain situations, the IRS collection statute expiration dates can be suspended. The general rule of thumb is if there is pending litigation on the account, the IRS will suspend the collection statutes. This means the IRS will halt the running of the statute while certain actions are taking place and once those actions stop, the collection statute will begin running again. The most common actions that suspend the collection statutes are:
1. Bankruptcy filing
2. Pending offer in compromise
3. Pending installment agreement
4. Pending innocent spouse relief
5. Pending appeals action – this includes a filed collection due process hearing request
6. Living outside of the United States for at least six months
It is important to note that even though the collection statutes are suspended during times of litigation, the IRS also places an automatic stay of enforced collection action on the account. Understanding your rights as a taxpayer is key when working toward resolving your tax liability. Contact Timberline Tax Group for additional information regarding your collection statutes and what you can expect moving forward.
Call Timberline Tax Group at 844-345-3250 for a free consultation.