Every client with federal tax debt also has an expiration date for that debt. Learning how to determine IRS CSED (Collection Statute Expiration Date) for each client is an essential skill for tax professionals, as it can significantly impact the available tax resolution options. While calculating the time the IRS has to collect back taxes may appear straightforward, understanding the intricacies of the expiration date and its implications can empower you to offer your clients the most effective solutions.
The Collection Statute Expiration Date, or CSED, marks the final day the IRS can collect outstanding taxes from a taxpayer or corporation. In general, this date falls ten years after the tax return was filed or the federal tax liability was assessed. However, certain factors can influence the CSED and extend the deadline, making it crucial for CPAs, tax professionals, and enrolled agents to dive deeper into the specifics of each case.
By mastering how to determine IRS CSED, you’ll be equipped to guide your clients through their tax debt journey with confidence and knowledge. This expertise will not only enable you to provide tailored advice and strategies but also contribute to your reputation as a trusted expert in the realm of tax resolution services.
Why is it important to know a client’s CSED?
Analyzing the CSED for each of your clients’ returns can help you determine whether your client is in an uncollectable status or could be put into a smaller installment agreement. That’s why it’s also important not to trust the IRS to make CSED calculations for your client. An incorrect date can lead to denied offers, appeals, or installment agreements.
How long does the IRS have to collect back taxes?
Unfortunately, the expiration date can be extended if the IRS is somehow barred from collecting on the debt, like in the event that the taxpayer or corporation declares bankruptcy, for example. Filling an Offer in Compromise or IRS Appeal Letter for your client can also extend the CSED because the IRS can’t collect on the tax debt until a decision has been made.
When the taxpayer reaches this date, however, the amount owed is written off by the IRS and is no longer the responsibility of your client.
PROTIP: When calculating a possible IRS Offer in Compromise for your client, the first step the IRS offer specialist takes is to calculate whether a taxpayer has the ability to full pay the tax due with an installment agreement before the statute runs out. They take the remaining monthly income plus any equity in assets and divide that by the number of months on the latest CSED. Paying off more recently filed returns with low balances may reduce the months left on the latest CSED. Not doing so could make it seem like the client has the ability to pay in full with installments, which could cause the IRS to deny the offer.
How IRS Solutions Software can help
Keeping track of a client who owes federal tax on multiple returns can be tricky. But if you use IRS Solutions as your CPA Accounting software, all the juggling work is done for you. Our software has the ability to directly request, download, and analyze your client’s unredacted wage and income transcript through the IRS e-services Transcript Delivery System (TDS). Once that data is in our system, the software automatically estimates the CSED for each return, determines if there are any factors that might extend the debt, and displays any other relevant details.
IRS Solutions Software not only automates this process, but also provides every detail you’ll need to negotiate with the IRS and minimize your client’s tax liabilities so that they can start to rebuild their financial future. Serve your clients year-round by providing tax resolution services with confidence using IRS Solutions Software.
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