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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – HOW MUCH TIME DOES THE IRS HAVE TO COLLECT THE TAX?

By Robert S. Schriebman

2024

Introduction

The primary statute for collection of IRS taxes is found in IRC § 6502.  Paraphrasing, IRC § 6502 states that the IRS has 10 years to collect the tax.  This sounds simple and straight-forward, but things can get complicated very fast.  In this article, I will discuss the rules extending to the basic 10-year collection statute.  I will also comment upon a recent US District Court case out of Ohio entitled US v Sherri Tenpenny, US District Court N.D. Ohio, Eastern Div., August 9, 2024.

When does the 10-Year Collection Statute Start?

IRS § 6502(a)(1) tells us that the 10-year collection statute begins after the date of assessment of the tax.  The collection statute starts when the IRS formally records the tax deficiency in its official records.  In other words, the collection statute does not begin to run on the date the IRS receives a tax return.  Several weeks can go by before the tax debt is officially recorded.  The most effective way to determine this date is to obtain an official transcript of your account from the IRS.

Events that Extend the Basic 10-Year Collection Statute, or When Does the Collection Statute End

There are several events that may give the IRS more time than 10 years from the date of the assessment.  The major events are the following:

  • Collection Due Process Proceeding (CDP): If you owe the IRS, you will receive a series of letters demanding payment; each letter gets stronger in language.  Eventually, you will receive a letter informing you of your right to a CDP hearing.  If you elect to go through this process, the collection statute will be extended during the entire pending of your CDP matter.
  • Signing a Collection Statute Extension: Sometimes the IRS will demand that you extend the collection statute if you elect an installment payment arrangement.  The IRS rarely uses this form.
  • Offer in Compromise (OIC): The collection statute is extended during the entire OIC process plus an additional period of time set forth in the IRC.
  • Bankruptcy Proceeding: Undergoing a bankruptcy proceeding will also extend the collection statute.

The Sherri Tenpenny Case

Pursuant to IRC § 6502 the IRS has 10 years to either attempt to collect the tax voluntarily, or to commence a case in federal court to obtain a civil judgment against the taxpayer.  The judgment allows the IRS to obtain a judgment lien that can be recorded.  The IRS then becomes a civil creditor and has more time to collect the tax.  This is what happened in the case of Sherri Tenpenny.  Sherri is a highly educated woman with a doctorate’s degree.  She owed the IRS for the years 2001, 2012 and 2013.  She wound up owing the IRS close to $650,000.  She failed, neglected, and refused to pay her taxes.  The IRS sought a judgment against her in federal court.  Sherri made several tax protestor arguments that were rejected by the judge offhand.  Finally, she resorted to her last argument that the collection statute had expired.

Looking back at all of the years she owed taxes, her history showed that she had several defaulted OICs as well as several defaulted installment agreements.  The IRS totaled up all the time these were pending that stopped or tolled the running of the basic collection statute.  She had effectively extended the statute just shy of an additional 10 years.  The IRS judgment against her was valid.  Sherri did not take into consideration how her past history extended the 10-year collection statute to almost 20 years.

Conclusion

If you have a history of making OICs or taking advantage of a CDP proceeding, you are going to be extending the statute of limitations for collection.  The best way to calculate the running of time is to obtain an English-language transcript of your account from the IRS and take it to a tax professional to review.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.  Mr. Schriebman is in private practice.  He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners a6502nd the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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