The IRS enforces a Collection Statute Expiration Date (CSED) on tax liabilities owed by taxpayers. Essentially, the IRS has a 10-year window to collect outstanding balances. If the IRS fails to collect these balances within the specified period, they must write off the remaining amounts, which can no longer be collected.
As a tax professional, it’s essential to understand the CSED tax implications and communicate this information to your clients. In many cases, taxpayers have had substantial debts written off because the IRS let the statute expire without taking enforcement action.
If your client has an outstanding debt for 8 or 9 years, there’s a possibility that the IRS may never pursue collection. However, it’s crucial to note that the standard 10-year CSED tax period is subject to several exceptions. Certain actions taken by the taxpayer or their representative can extend the CSED period, delaying the expiration date.
Some of these CSED Tax actions include:
- Filing a lawsuit: If a taxpayer files a lawsuit related to their tax liability, it could halt IRS enforcement actions and extend the CSED tax period.
- Appealing a tax decision: If a taxpayer appeals a tax decision, the IRS may be prevented from taking enforcement actions during the appeal process, resulting in an extended CSED.
- Submitting an Offer in Compromise (OIC): When a taxpayer submits an OIC to settle their tax debt for less than the full amount owed, it may temporarily stop the IRS from taking enforcement actions, extending the CSED.
Before taking any of these actions, it’s crucial to examine the CSED for your client carefully. As a tax professional, understanding the intricacies of the CSED tax and its impact on tax resolution can help you better serve your clients and potentially save them from significant financial burdens.
By leveraging your knowledge, you can assist clients in navigating complex tax situations and create tailored strategies to address their tax liabilities. This expertise will not only benefit your clients but also contribute to your reputation as a trusted advisor in the field of tax resolution.
Watch the video on CSED from a former IRS Agent for more insights:
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