How Long is a Federal Tax Lien Valid?

We frequently get calls from potential clients who ask us, “how long is a tax lien valid”? They may ask us to help them determine if the “statute of limitations” on an old tax debt has run yet or not. Here’s a quick overview as to how the IRS’ CSEDs (Collection Statute Expiration Dates) work.

Each tax assessment has a CSED, provided for in IRC Section 6502. The amount of time the IRS typically has to collect an assessed tax liability is 10 years from the date of assessment. Once that 10 years runs, the IRS’s right to pursue the liability ends.

Important Things to Understand about CSEDs:

-It is not as simple as: “I owed on my 2006 taxes and it’s 2017 now- more than 10 years have gone by. Do I still have to pay this?

-Remember, it’s 10 years from the DATE OF ASSESSMENT. If you filed your 2006 return by April 15, 2007 (the due date), and assuming the tax balance was assessed shortly thereafter, the CSED should have expired early 2017.

False/Fraudulent Returns

If a taxpayer fails to file a return or files a false/fraudulent return and the IRS files a Notice of Deficiency, once a Substitute for Return/Deficiency Assessment is made, the 10 years begins at THAT time. If the taxpayer files a new return in place of a Substitute for Return that results in a smaller liability, the original CSED date remains intact, but if an assessment/original return reflects more tax, then an additional assessment is made and a second CSED for the additional balance is established.

Ways to Suspend the Deadline

There are several things that can SUSPEND the running of time on IRS CSEDs. Note that most CSED suspenders are those that also suspend the IRS’ ability to collect the unpaid tax debt. These include:

  • Bankruptcy: The CSED is suspended for the duration of time the IRS is prohibited from collecting and for 6 months after; this includes the automatic stay put in place while the bankruptcy is pending as well as any time substantially all the debtor’s assets remain in the custody/control of the bankruptcy court.
  • Judgment/Litigation: A court action brought against the taxpayer prior to the expiration of the collection statute extends the period to collect until the liability/judgment is satisfied/becomes unenforceable.
  • Suits to Reduce Assessments to Judgment: The filing of a suit will suspend the collection statute during litigation.
  • Collection Due Process (CDP) Appeals: CSED is suspended from the date the IRS receives a timely-filed request for a CDP hearing until the date the CDP appeal is withdrawn or a determination from appeals becomes final. If 90 days is not remaining on the statute of limitations when the determination becomes final, the statute is extended to equal 90 days.
  • Offers in Compromise: CSED is suspended when the Offer is pending, for 30 days following an Offer rejection, and for the period of time a timely appeal of a rejection is considered in appeals.
  • Installment Agreements: The CSED is suspended for the time an Installment Agreement is pending, 30 days following the rejection of an agreement, 30 days following the termination of an installment agreement, and the appeal of a termination or rejection of an installment agreement. The IRS may grant a partial payment Installment Agreement and obtain a Form 900 Waiver that extends the statute no more than 5 years plus up to 1 year to account for changes in the agreement.
  •  Innocent Spouse: CSEDs are suspended on the requesting spouse from the time the claim is filed until either a waiver is signed or the 90 day period for petitioning the tax court has passed, plus 60 days. If the requesting spouse signs a waiver from the restrictions on collections, the CSED suspension will terminate 60 days after the waiver is filed with the IRS.
  • Taxpayer Living Outside the US: CSEDs are suspended while a taxpayer is outside the US if the absence is for a continuous period of at least 6 months and CSEDs cannot expire until 6 months after the taxpayer’s return to the country so that the IRS has an opportunity to collect the tax. There are different rules for combat zones/military deferments.
  • Wrongful Levy: A wrongful levy suspended the CSEDS from the date property is wrongfully seized to the date it is returned or a judgment is secured, plus 30 days. This is limited only to an amount equal to the amount of money or value of property returned.
  • Wrongful Lien: A wrongful lien suspends the running of CSEDs from the date a person becomes entitled to a certificate of discharge of lien until the earlier of the date on which the IRS no longer holds any amount as deposit/bond or the date a judgment becomes final. There are different rules on estate tax liens.
  • Taxpayer Assistance Order: If a taxpayer submits a Form 911, the CSEDs may be extended.

Do not attempt the risky strategy of simply waiting out a 10 year period and hoping the IRS will forgive your tax debts. If you owe back taxes and need assistance in developing a strategy to overcome your debt burden, seek the advice of an experienced tax controversy attorney.

At Murray Moyer, PLLC, we work with clients each day that owe back taxes. When asked, “how long is a federal tax lien valid?”, we immediately check the date of assessment and help you determine your specific expiration date. We then discuss a variety of tools and strategies to employ to remedy your tax debt situation. Contact us for a consultation.

Written by Justin Moyer on May 23, 2019.