Understanding How to Use the CSED to Your Advantage

If you have unpaid taxes that have been on your account for a while, one of the most important dates for you to know is the Collection Statute Expiration Date (CSED). Understanding and calculating this date is critical for anyone with unpaid IRS taxes. Put simply, the CSED is the date on which the IRS is no longer legally allowed to collect your unpaid taxes.

Knowing your CSED can help shape your financial decisions, influence a tax resolution strategy, or even help you figure out whether it’s worth negotiating with the IRS or if you should simply wait them out. Generally, it’s 10 years after the taxes are assessed, but it’s not always that simple to determine.

Understanding how to calculate the CSED is crucial. It can mean the difference between being subject to aggressive IRS collection tactics and finally putting your tax debt behind you. In this guide, we’ll break down the process step by step so you can confidently determine when your tax debt will expire and what to do as that date approaches.

Key Takeaways

  • How long? The IRS has 10 years to collect your tax debt (usually).
  • When it starts – The 10-year statute of limitations starts when your tax is assessed.
  • Tolling events can stop and extend the clock, for instance, applying for a settlement, requesting a Collection Due Process hearing, or filing for bankruptcy.
  • How to calculate: Get a transcript from the IRS to determine your assessment date.
  • Caution – IRS calculations aren’t always correct; talk with a tax pro for guidance.

What Is the IRS Collection Statute Expiration Date (CSED)?

Generally speaking, the IRS has 10 years from a tax assessment to collect the tax and any penalties and interest. The last date of this time frame is called the Collection Statute Expiration Date (CSED). It is important to note that the CSED begins when the IRS assesses your taxes, and is not the date that you file your federal tax return.

After the CSED expires, the IRS can no longer collect your tax debt, meaning no more levies, garnishments, or collection notices for that particular tax liability.

In some cases, you can work this deadline to your advantage, but to do that, you first need to know when it’s going to happen. Here are five steps to help you calculate the CSED for your tax situation.

Step 1: Determine the Tax Assessment Date

The assessment date is the starting point for the 10-year CSED clock. This is the date the IRS officially records your tax liability and is not necessarily the date when you filed your return.

  • Return filing and assessment: For most people, the assessment date is shortly after you file your tax return and the IRS processes it.
  • IRS audit assessment: If you’re audited and additional tax is found due, the assessment date is when the IRS records the extra amount.
  • Substitute for return (SFR) situations: If you don’t file, the IRS may file a return for you with a Substitute for Return. The assessment date is when the IRS processes and records the SFR. Typically, this occurs if you don’t respond to a Notice of Deficiency by the deadline.

How to Find Your Assessment Date:

This IRS keeps track of all tax transactions on your account, including assessments. You are able to find information regarding your tax account by going to the IRS’s portal called the Individual Online Account, requesting a transcript by mail, or by calling the IRS automated phone transcript service at 800-908-9946.

  • IRS Transcript of Tax Return: The transcript of your tax return shows most of the line items from your original Form 1040. You can request your Transcript of Tax Return online or by mail using IRS Form 4506-T.
  • Record of Account Transcript: This document combines the tax return and tax account transcripts in one. By requesting this transcript, you get a fuller picture of everything that has gone on in the tax year.
  • Notice of Federal Tax Lien: If you receive a notice that your property has a lien placed on it, it may show you the assessment date.

Tip: Look for the transaction code (usually TC 150 or TC 290) and its date on your transcript. This is your assessment date.

Step 2: Identify Tolling Events That Extend the CSED

There are certain actions that can suspend or extend the collection period. These actions are called tolling events. A suspension of the CSED collection period means that the IRS is not allowed to collect taxes for a certain amount of time while a tolling event takes place. An extension to the CSED makes it so the IRS has extra time added to the deadline the IRS originally had to collect.

Common Tolling Events:

  • Offer in Compromise (OIC)
      • While the IRS is looking over the application, the CSED is suspended. If the OIC is rejected, the CSED is suspended for an additional 30 days.
  • Installment Agreement Application
      • Requesting an Installment Agreement from the IRS means that while the review is requested, the CSED is suspended. A withdrawal or rejection of the IA will extend the CSED by 30 days.
  • Bankruptcy
      • Starting with the date that you petition for bankruptcy, the CSED is suspended until your case is discharged, dismissed, or closed. After the end of your bankruptcy court ruling, the CSED extends another 6 months.
  • Collection Due Process Hearings
      • During the time that the CDP hearing request is received and until you either withdraw or a final determination is made, the CSED is suspended. A final determination made within 90 days of your CSED ending means that the CSED is pushed out 90 days from the final determination.
  • Military Deferment or Living Overseas
    • If you’re out of the US for longer than six months, your CSED time starts after you return stateside. For service members, that clock starts at 180 days, and for non-service members, six months after your return.

Each tolling event adds time to your original 10-year period. For example, if you spend 8 months dealing with a bankruptcy case, your CSED is paused for 14 months and then extended by 14 months after the original deadline.

Step 3: Add Tolling Periods to Your Timeline

Now that you have your assessment date and know the tolling events that pause the IRS’s collection clock, you can calculate your true CSED.

  1. Start with your assessment date.
  2. Add 10 years
  3. Add the total number of days/months for all the tolling events.

Let’s assume that you had your taxes assessed on June 1, 2015. The initial 10-year CSED would be June 1, 2025. However, in January of 2018, you submitted an application for an Offer In Compromise, which took 6 months to process. Then, in March 2020, you submitted a bankruptcy filing, and the case took 8 months to complete. Because of these two tolling events, a total of 20 months were added to the original CSED. The new date the IRS has to try and collect by is February 1, 2027.

Step 4: Double-Check for IRS Errors

The IRS sometimes miscalculates CSEDs. Given the complexity of tolling events, it’s not uncommon for mistakes to occur. This may work either in your favor or with the IRS.

How to verify the IRS’s CSED Calculation

  • TXMODA Transcript: This is an internal IRS transcript that shows the IRS’s own CSED calculation. You can request it via Freedom of Information Act (FOIA) request or by having a tax professional call the IRS Practitioner Priority Service.
  • Record of Account Transcript: Look through your transcript to find and double-check any tolling periods that will impact your CSED.

Step 5: Reach Out to a Tax Professional

If your CSED is near, or if you spot discrepancies between your calculation and the IRS’, consult a tax attorney or enrolled agent. At Seattle Legal Services, PLLC, we regularly help clients review and dispute incorrect CSED calculations.

Helpful Tools and Resources

Tool/Document What It Shows and How to Get It
IRS Form 4506-T This request allows you access to your tax transcripts. Found on irs.gov
IRS Account Transcript Assessment dates, payments, and tolling events. Use Form 4506-T
Record of Account Transcript Combines Account and Return Transcript for your full tax account history. Use Form 4506-T
TXMODA Transcript Internal IRS transcript showing their CSED calculation. Contact a tax professional

Tip: Always keep copies of your transcripts and records. If you’re unsure, Seattle Legal Services, PLLC can help you obtain and interpret these documents.

What to Do If Your CSED Is Near or Has Passed

If your CSED is around the corner, there are certain things you want to avoid doing so that you don’t add time to the countdown.

First, don’t request an Offer in Compromise or Installment Agreement unless it is absolutely necessary. Both of these actions can pause the CSED clock and give the IRS more time to collect. Similarly, filing bankruptcy, requesting a CDP hearing, or moving overseas can all add time to your CSED.

If the CSED has passed, you will want to ensure that any current liens are released. The IRS must release any liens related to the tax year in question. Also of note, any penalties and interest that go along with your tax debt expire with the CSED.

Money that you paid to the IRS after your CSED expired may be eligible for a refund. Contact the IRS or a tax professional to learn more.

When to Consult a Tax Resolution Expert

If your CSED is close or if you’re unsure about your calculations, consult a tax attorney. A professional can help you avoid accidentally extending the statute expiration date and ensure your rights are protected. For a broader discussion of the statute of limitations and waiting out the IRS, see our information on the 10-year limit on collecting tax debt.

Knowing your IRS Collection Statute Expiration Date is not just a technical detail. It can be the key to resolving your tax debt and moving forward financially. By understanding how to calculate your CSED, you can make informed choices, avoid costly mistakes, and ensure you’re not paying more than you owe. Want to know your CSED? Schedule a transcript review with a licensed tax pro today. Contact the professionals at Seattle Legal Services PLLC today.

FAQs

How do I know when the IRS assessed my tax?

Check your IRS Account Transcript for the assessment date, usually listed as a transaction code (TC 150 or TC 290). Or ask a tax pro to help you.

What happens if I never filed a tax return—does the CSED apply?

The CSED doesn’t start until the tax is assessed, but if the IRS files a Substitute for Return (SFR), the collection period starts on the date the IRS assesses the tax.

Does filing for an extension delay the CSED?

Requesting an extension gives you extra time to file, and the taxes can’t be assessed until you file. So, that indirectly affects the CSED.

Can the IRS collect after the CSED if I made a payment recently?

No. The IRS cannot legally collect after the CSED. If you paid after the expiration, you may be able to request a refund.

How do I get a copy of my IRS TXMODA transcript?

Request via Freedom of Information Act or have a tax professional call the IRS Practitioner Priority Service.

Will an IRS payment plan extend my statute of limitations?

Applying for a payment plan (Installment Agreement) can pause the CSED clock while your application is pending.

What if the IRS incorrectly calculated my CSED?

Review your transcripts and consult a tax professional. You can dispute incorrect CSEDs with the IRS.

Sources

https://www.irs.gov/filing/time-irs-can-collect-tax

https://www.taxpayeradvocate.irs.gov/tax-terms/collection-statute-expiration-date-csed/

https://www.irs.gov/forms-pubs/about-form-4506-t

https://www.irs.gov/pub/irs-pdf/f4506t.pdf

https://www.taxpayeradvocate.irs.gov/news/nta-blog/nta-blog-transcripts-pt2/2021/10/

https://www.irs.gov/privacy-disclosure/irs-freedom-of-information-act