The IRS can ask a taxpayer to extend or waive the statute of limitations for tax assessment or collections. You should consult a tax attorney before agreeing to any extension and make sure that it is in your best interests. You may also want to limit the length or scope of the extension.
Tax Assessment Waivers
The IRS generally has three years to assess tax on a return. If your return is being examined and the Assessment Statute Expiration Date (ASED) is approaching, the IRS may ask you to extend this period.
Extending the ASED is a difficult decision. At the very least, you should not grant the waiver without talking to a tax attorney. In some cases, the IRS may really need more time to examine documents and make a decision on an issue. If you are going to grant an extension, you should clearly state the scope and length of the waiver. This prevents the IRS from discovering a new issue and expanding the scope of the tax audit.
In other cases, you may want to simply reject the waiver request if it doesn’t offer you any potential benefits.
Tax Collection Waivers
There aren’t many situations where the IRS ask will ask for an extension of the Collections Statute Expiration Date (CSED). The collection period is generally ten years, and the IRS can’t enforce the tax debt after this time.
One case where the IRS may seek waivers is when negotiating a partial payment installment agreement (PPIA). PPIAs may be granted when a taxpayer can’t pay the full amount before the CSED, but still has the ability to make monthly payments.
A waiver may come into play if the taxpayer is expected to acquire a new asset after the CSED. If liquidating this asset is the best way to resolve the tax liability, the taxpayer can agree to extend the CSED until the new asset is available for liquidation.
In these cases, the taxpayer may agree to extend the CSED if it allows them to avoid seizure of other assets. The IRS can collect more revenue, and the taxpayer gets to avoid a levy of current assets.
Contact a tax attorney if the IRS has asked you to waive or extend the statute of limitations and you aren’t sure what to do.
The Gartzman Law Firm handles IRS tax debt and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.