The statute of limitations for enforcing the IRS collection begins on the date the tax is collected. Tax advisors new to the IRS debt collection agency may not be fully aware of the implications of the statute of limitations on a case and disapprove of its relevance because the statute of limitations is years in the future. In some cases, however, this assumption can be a costly mistake. Many taxpayers with the balance due on their return who cannot afford to pay in full turn to a tax advisor or the IRS website to review their payment options.
How the statute of limitations is determined
In order for the IRS to initiate a debt collection process, the tax must be assessed. The limitation period for collection purposes begins with the date of the assessment. An assessment is made when a taxpayer’s liability is recorded and signed. To qualify for an assessment, an income tax return must include reportable gross income and qualified deductions, and calculate the taxpayer’s net taxable income with such uniformity, completeness and arrangement that the physical task of processing and reviewing returns can be easily accomplished. In general, the IRS must assess any tax from the date the taxpayer files the tax return.
If a taxpayer files their tax return on time by the original due date, the assessment date is generally a few weeks after the tax return is filed. Once a return has been submitted, it will take some time to process.