Taxation & Estate Planning

When does the collection of IRS debt expire?

By howardlevy

With more money sitting delinquent in the US Treasury than the government has resources to collect, this is a great question.  All of that “quiet” debt does go eventually go away.  

The IRS has 10 years to collect a tax debt.  The IRS refers to this as a “Collection Statute Expiration Date.” Internally, IRS personnel call it by the acronym “CSED” (pronounced “see-said”).

The 10 years begins when an act is taken to create the debt. That is usually the filing of a tax return with an unpaid balance, resulting in an ‘assessment” by the IRS of the liability.  The collection timeframe can also start from the “assessment” of a balance due from an audit.

After 10 years, the IRS will clear the account balances to zero.  Transcripts can be obtained from the IRS as verification.  The transcripts will show an IRS entry reading “Balance cleared to zero - expiration of statute collection date.”  Any tax liens that were filed will also expire and become legally unenforceable.

“Running out” the collection statute expiration date is a strategy that must be implemented carefully, understanding when it is an appropriate remedy and what actions taken by you can inadvertently extend the timeframe (i.e., offer in compromise, bankruptcy, collection appeals).  If you take an action to give the IRS more time to collect, make sure it is worthwhile.

More on the “CSED” from the Internal Manual 5.1.19, Collection Statute Expiration, can be found here. Legal reference can be found in Internal Revenue Code section 6502. 

Full post as published by IRS and the Law on July 19, 2008 (boomark / email).