IRS Routinely Violates the Collection Statute of Limitations

Press Release
FOR IMMEDIATE RELEASE
TIGTA Report Number: 2022-10-043
Newport Beach, California

A recent August 19, 2022 Treasury Inspector General For Tax Administration ("TIGTA") report held the inspector continued to identify errors related to the suspension of the collection Statute Expiration Date ("CSED")  on taxpayer accounts.  TIGTA found that 18 (20 percent) of the 91 cases reviewed had an incorrect CSED.  In TIGTA's prior year review, it identified 19 percent of cases had CSED errors (15 taxpayer accounts from a sample of 81). The CSED is the expiration of the time period established by law to collect taxes. The CSED is normally 10 years from the date of the tax assessment. Once a liability is assessed, the statute of limitations for collection begins to run. The expiration of the collection statute ends the Federal Government’s right to pursue collection of a liability. When a request for a CDP hearing is timely received, the IRS suspends the CSED from the receipt date of the CDP hearing request until the date the Appeals determination is made final or the date the IRS receives the taxpayer’s withdrawal request.  For this review, TIGTA identified:

• 10 CDP cases had the CSED incorrectly extended. As a result, the IRS has more time to collect delinquent taxes than it was authorized. Additional collection activity creates an unnecessary burden on the taxpayer.  Based on our sample results, TIGRA estimates that the IRS may have improperly extended the CSED for 3,233 of 28,667 CDP cases closed in FY 2021;

• 8 CDP cases had the CSED incorrectly shortened. As a result, the IRS has less time to collect any outstanding balance due from the taxpayer than it was authorized. Based on TIGTA's sample results, it estimates that the IRS may have inadvertently shortened the CSED for 2,586 of 28,667 CDP cases closed in FY 2021.

Calling this almost a wash would be inappropriate considering this means the IRS violated the collection the statute in an estimated 5,819 cases.   Appeals management agreed with all of the errors TIGTA identified and stated that the CSED errors were a result of human error.  Hopefully the IRS improves training on this to allow the statute to be correctly applied.  It also means anytime a taxpayer owes taxes it is extremely important that the collection statute expiration date be examined.   If the statute has expired it is legally impermissible for the IRS to collect the debt owed and it should release the tax liens.

Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.

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https://wilsontaxlaw.com

Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292