Court Holds that IRS Collection Statute of Limitation is Still Open, Can still Collect Taxes

Posted on August 15, 2018

The taxpayer was previously married and had unpaid assessed joint liability for 1993, 1994, 1995, 1997 and 1998 with her ex-husband. While still married, the couple filed a Petition in the United States Tax Court protesting the proposed liability for those years. The wife asked for, and received, innocent spouse relief for all years except 1998. The IRS ultimately assessed the liability for 1998 against her in 2003. The IRS subsequently filed lawsuits against the taxpayers seeking to collect the unpaid assessed liability for 1998.

In response to the suit, the taxpayers argued that the IRS had allowed the collection statute of limitation to expire and asked that the case be dismissed. The IRS typically has ten years from the date a tax is assessed in order to collect it from the taxpayer. There are certain things that extend the ten-year collection statute of limitation, including asking the IRS for an installment agreement, filing an Offer in Compromise, filing a bankruptcy or filing a Request for a Collection Due Process Hearing. In that event, the collection statute of limitation is extended beyond the ten-year period. The collection statute is typically extended by the time that the taxpayer’s request for relief was pending with the IRS, more if a bankruptcy was filed.

In this case, the IRS contended that the taxpayers filed a Request for a Collection Due Process Hearing, which extended the collection statute of limitation for an additional 708 days. The taxpayer contended that her Request for a Collection Due Process Hearing was withdrawn after one month, meaning that the IRS had brought the suit against her after the collection statute of limitation had expired.

After examining the record, the Court held in favor of the IRS insofar as the taxpayer had extended collection statute of limitation by 708 days and the IRS brought suit against the taxpayers on the 695th day of the extended collection statute. Do you owe money to the IRS? Do you think that the IRS is attempting to collect money from you outside of the ten-year collection statute of limitation? Call us, we can help.