Internal Revenue Code 6502: IRS Collection Statute

Internal Revenue Code Section 6502 is a federal law that establishes a time limit for the Internal Revenue Service (IRS) to collect tax debt. This regulation is a protection for taxpayers, ensuring that the government does not have an indefinite period to pursue outstanding tax liabilities. The existence of this collection timeframe provides a clear end point for the IRS’s collection authority.

The Collection Statute Expiration Date (CSED)

The core of IRC Section 6502 is the establishment of a timeline for the IRS to collect taxes, which is ten years. This ten-year window is known as the Collection Statute Expiration Date, or CSED. The countdown for this period begins on the date the tax is officially assessed by the IRS, not when a tax return is due or filed. An assessment is the formal recording of a tax liability on the IRS’s books that legally empowers the agency to begin collection actions.

There are three primary ways a tax assessment can occur. The most common is self-assessment, which happens when a taxpayer files a return acknowledging the tax owed. Another method is a summary assessment, where the IRS corrects a return for mathematical errors or assesses certain penalties. The third type is a deficiency assessment, which takes place after an IRS audit determines the taxpayer owes more tax than was reported.

Each of these assessment types creates a specific starting date for the ten-year collection period. For a single tax year, there can be multiple assessment dates if an initial self-assessment is later followed by a deficiency assessment from an audit. In such cases, each assessment will have its own distinct ten-year CSED.

Events That Suspend the Collection Period

While the ten-year collection period appears straightforward, it is not always an uninterrupted countdown. Certain actions taken by a taxpayer can pause, or “toll,” the CSED clock, extending the time the IRS has to collect the debt. These suspensions allow time for various resolution processes to unfold.

One of the most common events that suspends the collection period is the submission of an Offer in Compromise (OIC). An OIC is a proposal to settle a tax debt for less than the full amount owed. The CSED clock is paused from the time the OIC is submitted until a decision is made by the IRS, and if the offer is rejected, the clock remains paused for an additional 30 days.

Requesting an Installment Agreement to make monthly payments on a tax debt can also suspend the CSED. The clock is paused while the IRS is reviewing the request. In some specific cases, particularly with partial payment installment agreements, the IRS may require the taxpayer to agree to extend the CSED as a condition of the agreement, using Form 900, the Tax Collection Waiver.

Filing a request for a Collection Due Process (CDP) hearing also tolls the collection statute. The CSED is suspended for the entire time the hearing is pending and for any subsequent appeal in court, ensuring the taxpayer can exercise their appeal rights without the collection period expiring.

When a taxpayer files for bankruptcy, an “automatic stay” goes into effect, which prohibits the IRS from taking most collection actions. The CSED is suspended for the duration of the bankruptcy case plus an additional six months after it concludes.

Requesting Innocent Spouse Relief is another action that pauses the collection clock. This relief can absolve a person from tax liabilities resulting from their spouse’s errors on a joint tax return. The CSED is suspended from the time the request is filed until the IRS makes a final determination.

Being physically outside of the United States for a continuous period of at least six months will also pause the CSED. The suspension lasts for the duration of the absence plus an additional six months upon return.

Determining Your Specific CSED

The most reliable way to determine this specific date is to obtain an official account transcript from the IRS. This document provides a detailed history of a taxpayer’s account for a specific tax year, including the original assessment date and the calculated CSED, which already accounts for any suspensions.

The most direct way is through the “Get Transcript” tool available on the IRS website. After verifying their identity through a secure process, taxpayers can instantly view, print, or download their transcripts for the desired tax periods. This online service provides immediate access to the necessary information.

The alternative method is to file Form 4506-T, Request for Transcript of Tax Return. This form can be submitted by mail or fax, and the IRS will then mail the requested transcript to the address on record. This method is a dependable option for those who cannot or prefer not to use the web-based service.

Once the account transcript is obtained, the taxpayer can locate the CSED by reviewing the transaction codes. The transcript will list an “assessment date” for the tax liability. Further down the list of transactions, there should be an entry explicitly stating the “Collection Statute Expiration Date.”

Actions the IRS Can Take Within the Collection Period

The CSED defines the window during which the IRS is legally authorized to use its collection tools. Before this date expires, the agency can take significant actions to recover unpaid taxes. These enforcement measures are why understanding and tracking the CSED is important for taxpayers with outstanding liabilities.

One of the first actions the IRS can take is the filing of a Notice of Federal Tax Lien. A tax lien is a legal claim against all of a taxpayer’s current and future property, including real estate and personal assets. The lien does not seize property but secures the government’s interest, making it difficult for the taxpayer to sell or transfer assets without first satisfying the tax debt.

A more direct collection tool is the levy, which is the actual seizure of assets to satisfy a tax debt. The IRS can levy a wide range of assets, most commonly by garnishing wages or seizing funds from a taxpayer’s bank account. Before issuing a levy, the IRS must send a Final Notice of Intent to Levy, which informs the taxpayer of their right to a Collection Due Process hearing.

The IRS can also use its authority to offset future tax refunds. If a taxpayer is due a refund in a subsequent year while still owing a balance from a prior year, the IRS can automatically apply that refund to the outstanding debt. This process, known as a refund offset, is a common method for the agency to collect smaller balances.