Can the IRS Extend the Statute of Limitations Collection + Yes, Read Below

October 5, 2016
Written by: Fresh Start Tax

 

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IRM 5.1.19.3  (01-01-2006)
Case Actions That Can Suspend And/Or Extend A CSED

1. A variety of laws affect CSEDs.

A brief summary of some of the various case actions that can suspend and/or extend a CSED follows.

This IRM provides a brief overview of some of these case actions; it is not all inclusive. The following sections are included to highlight relevant issues.

Details pertaining to the specific subject matter should be further researched in the applicable IRM section, which in most cases will be cross-referenced.

2. If more than one case action suspends the running of the collection statute, and the suspensions overlap, the CSED is viewed as extended only once for the period the suspensions overlap.

Example:


Taxpayer Smith owes 1040 taxes for the period ending 12/31/1998. The tax assessment date is 06/01/1999 which established the original CSED as 06/01/2009.

Smith is in the Army Reserves, he gets called up for combat duty and enters the combat zone on 05/10/2004. He subsequently leaves the combat zone on 03/01/2005.

He submits an offer in compromise on 04/20/2005, it is rejected on 10/17/2005, and the rejection is not appealed.

Both case actions, entering the combat zone and submitting the offer in compromise, suspend and extend the CSED.

The combat zone duty suspends the CSED from 05/10/2004 through 03/01/2005 plus 180 days (through 08/28/2005).

Consideration of the offer in compromise suspends the CSED from 04/20/2005 through 10/17/2005 plus an additional 30 days for the rejection appeal period to 11/16/2005.

However, because these case actions overlap, the CSED will be suspended only from the date Smith enters the combat zone (TC 500 cc 56 on 05/10/2004) through the date the offer in compromise is rejected and the rejection appeal period ends (TC 481 on 11/16/2005).

In this case the overlapping of the two case actions, from 04/20/2005 to 08/28/2005, is considered in the CSED extension only once. 


The CSED will be extended 555 days from the original CSED of 06/01/2009. The new CSED will be 12/08/2010.

 

5.1.19.3.1  (05-19-2016)
Bankruptcy

1. The CSED, in a case under the Bankruptcy Code, is suspended while the Service is prohibited by reason of the case from collecting, and for six months thereafter. For more information see IRC 6503(h)(2).

Thus, the CSED is generally suspended while the automatic stay imposed by the bankruptcy is in effect. Even if the suspension of the CSED under IRC 6503(h) no longer applies, the CSED still may be suspended when substantially all the debtor’s assets remain in the custody or control of the bankruptcy court under IRC 6503(b).

 

5.1.19.3.2  (05-19-2016)
Judgment/Litigation

1. Per IRC 6502(a), a court action brought against the taxpayer prior to the expiration of the collection statute extends the period to collect until the tax liability or judgment against the taxpayer is satisfied or becomes unenforceable.

 

1. In order for a suit to reduce the assessments to judgment and suspend the collection period, it must be filed prior to the CSED.The filing of a suit will suspend the collection statute during litigation. For more information see IRM 5.17.4.7, Suit to Reduce Assessments to Judgment.

2. When a judgment is entered in a case where assessments were reduced to judgment, request input of TC 550, definer code 04, using 20 years from the date the judgment was entered as the new CSED. 
Reminder:

The TC 550 definer code 04 must be input before the TC 520 is reversed. This will prevent the CSED from expiring if it falls during the pendency of the litigation.

5.1.19.3.3  (05-13-2005)
Collection Due Process (CDP)

1. The CSED is suspended from the date the Service receives a timely filed request for a CDP hearing to the date the taxpayer withdraws their request for a CDP hearing or the date the determination from Appeals becomes final, including any court appeals.

2. If 90 days is not remaining on the statute of limitations when the determination becomes final, the statute of limitations is extended to equal 90 days. The collection statute is not extended for equivalency hearings.

 

5.1.19.3.4  (11-22-2013)
Offer In Compromise

1. For offers pending prior to January 1, 2000, the CSED extension was affected by Treasury Regulation § 301.7122–1(f) (1960).

Under this regulation the practice of the Service generally was to obtain from the taxpayer a waiver of the CSED for the period the offer in compromise was pending, while any installment of an accepted offer remained unpaid, and for one additional year thereafter.

2. For offers pending prior to January 1, 2000, a waiver of the CSED cannot extend the CSED beyond either December 31, 2002, or the original CSED, whichever is later, pursuant to section 3461(c)(2) of the IRS Restructuring and Reform Act of 1998 (RRA 98).

3. For offers pending on or made after December 31, 1999, suspensions of the running of the CSED in the offer in compromise context are governed by statute, specifically by IRC 6331(k)(1) and (3).

4. Under these provisions, the Service is prohibited from levying, and the CSED is suspended

A. While an offer is pending with the Service,
B. For 30 days immediately following rejection of the offer, and
C. For the period that a timely filed appeal of a rejection is being considered in Appeals.

5. 
CSED extensions for the period of time “while any installment remains unpaid” and “for one additional year thereafter” are eliminated.

6. The Community Renewal Tax Relief Act of 2000, effective December 21, 2000, amended IRC 6331(k)(3) and eliminated the suspension of the CSED while offers (and installment agreements) were pending.

7. The Job Creation and Workers Assistance Act of 2002, effective March 9, 2002, amended IRC 6331(k)(3) and reinstated the CSED suspension with respect to both offers and installment agreements.

With respect to offers, the CSED is again suspended for:

A. The number of days the offer remains open from March 9, 2002,
B. The number of days the offer is pending,
C. Thirty days after rejection of the offer, and
D. The period that a timely filed appeal of a rejection is being considered in Appeals.
8.
9. Cases may be encountered where prior rules were in effect. For more information see IRM 5.8.10.7, Effect of Previous Offers on Collection Statute.
10. If only one party to a joint assessment files an OIC, then the CSED is suspended just for that person.
5.1.19.3.5  (10-16-2012)
Installment Agreements – Partial Payment Installment Agreements

 

With Form 900, Tax Collection Waiver

1. Form 900, Tax Collection Waiver, is only executed in connection with the granting a partial payment installment agreement and only in certain situations.

See IRM 5.14.2.1.3, Waiver Procedures for Partial Payment Installment Agreements. IRS policy dictates that a Form 900 be limited to no more than five years, plus up to one year to account for changes in the agreement.

Note:
Prior to July 2005, IRS policy permitted CSED extensions in conjunction with all installment agreements.

2. Effective March 9, 2002, the CSED is suspended during:

• The time the proposed installment agreement is pending,
• Thirty days following the rejection of a proposed installment agreement,
• Thirty days following termination of an installment agreement, and,
• Any appeal of the termination or rejection of the installment agreement. 
Note:
This change is not retroactive. The suspension of the running of the collection statute is during the time that a levy is prohibited. The CSED is not suspended while an installment agreement is in effect.

 

5.1.19.3.6  (05-19-2016)
Relief From Joint And Several Liability On Joint Returns/Innocent Spouse

1. Collection by levy or a proceeding in court against a spouse is suspended for the requesting spouse when he or she makes a qualifying request under IRC 6015(b), and/or IRC 6015(c). Collection is suspended for claims filed under IRC 6015(f) if the liability was unpaid as of December 20, 2006, or the liability did not arise until after December 20, 2006. For more information see IRM 25.15.1.8, Statute of Limitations on Collection.

2. The collection period is suspended from the filing of the claim until the earlier of the date a waiver is filed, or until the expiration of the 90 day period for petitioning the Tax Court, or if a Tax Court petition is filed, when the Tax Court decision becomes final, plus, in each instance, 60 days.

3. If a request for relief is made in response to collection due process procedures, there is also suspension of collection activity and the collection period provided for by IRC 6330(e) for the period during which any administrative hearings, and appeals therein, regarding the levy are pending. The rules for suspension under IRC 6330 differ from IRC 6015. In general, the latest suspension of collection and the collection period should control, which may require analyzing the suspension under both IRC 6015 and IRC 6330 where relief from joint and several liability is requested as part of an IRC 6330 hearing.

4. If the requesting spouse signs a waiver of the restrictions on collection, the suspension of the period of limitations on collection against the requesting spouse will terminate 60 days after the waiver is filed with the Service, limiting the CSED extension to the period from when the claim was filed to the time the waiver was signed, plus 60 days.

5. A request for reconsideration is not a qualified request for relief for purposes of Treasury Regulation §1.6015-1(h)(5), and does not trigger the restrictions on collection pursuant to section 6015(e)(1)(B) or the suspension of the collection period of limitation under section 6015(e)(2).

5.1.19.3.7  (06-04-2009)
Taxpayer Living Outside the U.S.

1. The period of limitations on collection after assessment is suspended while the taxpayer is outside the United States if the absence is for a continuous period of at least six months per IRC 6503(c) .

2. To make certain that the Government has an opportunity to collect the tax after the taxpayer’s return, the period does not expire (where the taxpayer has been out of the country for six months or more) until six months after the taxpayer’s return to the country.

As the application of this provision can result in the CSED being suspended for a very long time, policies for the administration of this code section are now established.

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