What is CSED (IRS)?

CSED (IRS)- Understanding the IRS Collection Statute Expiration Date.

What is CSED (IRS)? CSED is the IRS acronym for Collection Statute Expiration Date as it appears in many IRS internal computer transcripts of taxpayer accounts, which tells the IRS collections officer what the IRS system has computed as the statutory expiration date for collection of the tax. Although the computer’s CSED date is sometimes inaccurate, it is still generally relied on by IRS employees in practice.

Almost any time the IRS is prevented from collecting by law, time is added to extend the IRS’s statute of limitations period (the allowed time per law) to collect.  Some common actions extending the IRS’s time to collect include Requests for IRS Installment Agreement or Payment Plan, requesting an Offer in Compromise, requesting a Collection Due Process Hearing, or filing Bankruptcy.

The IRS CSED Will Generally Expire 10 years From the Tax Assessment Date, With Some Actions Extending the CSED for the IRS.

The general rule is that the IRS must collect taxes within 10 years of the date of assessment.  The assessment date is the date of the filing of the return (or 4/15 if later) or the date audit/exam liabilities are entered as assessments in the IRS’s records.  However, bankruptcy and requests for installment agreement, among other things, can extend the statute of limitations pursuant to Section 6503 of the Internal Revenue Code.  Certain actions extending the CSED, IRS favorably, are discussed below.  For more specific information, a tax professional should be contacted.

Does an installment agreement extend the statute of limitations?

Yes, an installment agreement extends the IRS’s statute of limitations on collections, but only from the time it is submitted and accepted/rejected (including appeal) plus 30 days – not while in payment status.  Section 6331(k) of the Internal Revenue Code prevents the IRS from enforced collection actions while the installment agreement is pending and for 30 days after denial or termination.  The collection statute expiration date is tolled (extended) during the “pending” period plus 30 days.

Does an offer in compromise extend the statute of limitations?

Yes, an offer in compromise extends the IRS’s statute of limitations on collections but only if it is deemed processable (not returned as unprocessable without consideration).  The statute of limitations for the IRS to collect is extended for the amount of time the Offer in Compromise is “pending” plus 30 days.  For this reason, if a taxpayer’s account is not under immediate threat of collection, it may be preferable for some taxpayers to pursue either audit reconsideration, file an amended return, or file a claim for refund instead of an OIC based on doubt as to liability.

In addition, per Section 7 of Form 656’s offer terms, at subsection (p), by signing the OIC form, the taxpayer agrees to allow extra time for an audit of currently open years, 1 year from the closure of the OIC case by the IRS.

Does a Form 12153 request for Collection Due Process Hearing (CDP) extend the statute of limitations? 

Yes.  The CSED for the IRS’s collections is extended from the date the request for a Collection Due Process hearing is received by the IRS for as long as it is pending.  If it is withdrawn, the date of the withdrawal is the last date for computing the extension.  If a determination is made by the IRS, the last date for computing the period of extension is when it goes “final.”  The filing of a Tax Court petition keeps the determination from going final until the Tax Court case is resolved.  The final day is generally the date of the determination letter plus 30 days.  One exception is where there is less than 90 days left on the limitations period when the CDP determination becomes final, then they get 90 days regardless.

Does a bankruptcy extend the statute of limitations?

Yes.  With respect to a bankruptcy proceeding under Title 11 U.S.C., the running of the IRS’s CSED period is suspended for the period during which the government is prohibited from collection (the duration of the bankruptcy proceeding unless a stay is lifted by motion of a creditor) plus 6 months thereafter.

Before the Expiration of the CSED, IRS Can File an Action to Extend the Time.

The IRS can file suit to foreclose or reduce a tax liability to judgment at any time before the end of the IRS’s collections period.  For that reason, waiting out a CSED for the taxes to expire is a risky proposition.  In any event, the law requires taxes to be paid and, if possible, full payment (including through payment plans or offer in compromise) is the one way to make sure the balance due disappears forever.

The above is not an exhaustive list of the statutory collection time extension or tolling rules, but are applicable in many cases, but not to all cases.  This can be a very technical area of law, with serious repercussions if the precise rules applicable to a taxpayer’s case are not personally evaluated and applied with great attention to detail.  A tax professional should be consulted before making any decision that relies on or may affect the IRS’s CSED.

Daniel W. Layton, Esq., is a former IRS trial attorney, former federal prosecutor, and currently the principal of DWL Tax Law in Newport Beach, Orange County, California.

Updated 07/17/2021 by Daniel Layton.