An “assessment” is the timely recording of a taxpayer’s liability in accordance with IRS rules.1  Generally, assessments must be made by the IRS within 3 years after the filing of a return.2 The period is extended to 6 years if a return omitted more than 25% of the taxpayer’s gross income.3 The 3- or 6-year limit on assessment is referred to as the Assessment Statute Expiration Date (ASED). This period may be waived by the taxpayer. The assessment period does not begin if a tax return was fraudulent or not filed.4 There is no statute of limitation for assessment of a fraudulent return, and the subsequent filing of a non-fraudulent return does not avoid the unlimited statute of limitation for the original return.5 However, when the original fraud consists of not filing a return, a subsequent return triggers the 3-year limit on assessment.6

The taxpayer has a right to the IRS’s record of assessment. Transcripts of a taxpayer’s records may be ordered by tax professionals from the Practitioner’s Priority Service at (866) 860-4259. These transcripts can also be obtained by tax attorneys with access to the IRS online database through E-services. 

There are three different types of transcripts that are useful to a tax attorney. The first is the “account” transcript which will state the amount of tax liability and provide a timeline of actions taken by the taxpayer and the IRS for that tax year; it will also enable you to determine the expiration date for collections.7 The second is the “wage and income” transcript which show all information reported by third parties, such as W-2 and 1099 information, mortgage interest payments, IRA withdrawals, and cancellation of debt. The third transcript is the “tax return” transcript which provides a summary of the original tax return filed by the taxpayer. If the return is amended by the taxpayer or changed by the IRS, however, the “tax return” transcript will not be updated to show those changes. You will need to get that information from the client or by calling the IRS. 

• 1I.R.C. § 6203.
• 2I.R.C. § 6501.
• 3I.R.C. § 6501(e)(1).
• 4I.R.C. § 6501(c).
• 5I.R.C. § 6501(c)(1)–(2); Badaracco v. Comm’r, 464 U.S. 386 (1984). A preparer’s fraud can extend the statute of limitations. See Allen v. Comm’r, 128 T.C. 37 (2007).
• 6I.R.C. § 6501(c)(3); IRS Nat’l Office Field Serv. Advice, Assistant Chief Counsel Memorandum, No. 200051040 (Dec. 22, 2000).
• 7For guidance in spotting statute of limitations issues, see Am. Bar Ass’n, Effectively Representing Your Client before the IRS ch. 17 (8th ed. 2021). The IRS account transcripts will use code 150 to designate the assessment date. See Transaction Codes, Pocket Guide, IRS Document 11734 (Rev. 5-2012).

Generally, the IRS has 10 years after a timely assessment to collect taxes.1 The date after which the IRS may no longer collect taxes is referred to as the Collection Statute Expiration Date (CSED). The IRS Practitioner Priority Service (866-860-4259) will tell you the CSED. It is common for the IRS to miscalculate the CSED. Therefore, do not rely on the IRS calculation. If the IRS collection employee won’t review and decide a CSED defense, request a Taxpayer Assistance Order by a Form 911 from your Taxpayer Advocate Service office.

The 10-year time limit can be tolled by deficiency notices, Tax Court proceedings, collection due process hearings, requests for innocent spouse relief, Offers in Compromise, bankruptcy, Taxpayer Assistance Orders, and appeals of wrongful levies or liens.2 If the 10-year period is close to expiration, be careful about taking action that may extend limitations period.

Being placed into Currently Not Collectable status does not toll the CSED. If the suspension action was taken by a separated spouse, determine whether that action also suspended the limitation period as to your client. 

If your client lived in a federally declared disaster area, the I.R.S. may have extended the limitation periods under its I.R.C. § 7508 (A) authority. For example, after Hurricane Katrina, the IRS deadlines for collection were extended for 1 year.3

• 1I.R.C. § 6502.
• 2I.R.M. 5.1.19.3. Note that some cases may involve several actions that suspend the statute of limitations. See, e.g., I.R.M. 5.1.19.3.6.3 (giving the IRS’s position on how to calculate the suspension periods that result from an innocent spouse claim made within a collection due process appeal).
• 3IRS Notice 2006-20 (extending limitation periods to August 28, 2006 for taxpayers affected by Hurricane Katrina).

Previously, the IRS required taxpayers that could pay a monthly amount towards their liability but could not pay off the entire amount before the CSED to waive the protections of the CSED. It is now possible to request a “partial installment agreement”, which allows taxpayers to pay what they can afford until the CSED extinguishes the rest of their debts. To obtain this kind of agreement, a taxpayer must be able to provide complete financial documentation to show that the monthly amount is the most the taxpayer can afford to pay after paying basic expenses. Documentation includes paycheck stubs, public benefits award letters, bills, leases, and current bank statements. A partial installment agreement is particularly advantageous if a taxpayer can afford to make some payments towards the tax liability and wants to forestall other possible IRS collection actions, such as levies and bank account seizures.