The IRS is given 10 years from the date the tax is assessed to collect in most cases by 26 USC §6502, a section of the Internal Revenue Code . The date after which the tax can no longer be collected is call the “Collection Expiration Statute Date” or “CSED” for short.
However, there are many things that can happen that will give the IRS collectors more time to collect the tax. Under most circumstances, when the IRS collection officers are prevented from taking action to collect an overdue tax, the collection time is extended by the amount of time they can’t collect plus some extra time to restart their collection work.
Federal law prevents the IRS from using its powers to forcibly collect unpaid tax when an Offer in Compromise is pending and for an additional 30 days after the offer has been rejected if it was unsuccessful. Likewise, if a taxpayer has appealed a decision by the IRS to take coercive action to collect the tax such as levy or siezure, the time that is taken to review the appeal, plus 30 days is added to the collection period and the CSED is extended. Both of these extension rules are contained in 26 USC §6331.
Additional provisions for extending the collection period are contained in 26 USC §6503. This section of the Internal Revenue Code provides for extension when the assets of a taxpayer are in the custody or under the control of any court, and for 6 months after they are released. The collection period also is extended for the period of time when a taxpayer is outside of the United States continuously for six months or more.
One common way the IRS collection period is extended and the CSED is delayed is by the filing of a proceeding in bankruptcy court. Because federal law prohibits collection of a pre-bankruptcy tax while the bankruptcy case is being processed, 26 USC §6503(h) allows the IRS tax collectors additional time equal to the amount of time bankruptcy case was open plus an additional 6 months for collection after the bankruptcy stay is released.
Of course, the IRS is no longer able to collect tax after bankruptcy if the tax was subject to the bankruptcy discharge. To learn more about what types of tax debts are discharged in a bankruptcy, read: What About The IRS? and Use Bankruptcy To Solve Tax Problems. Both of these articles and many more can be found on the Bankruptcy Law Network.
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