Can the IRS Collect a Debt from Oil and Gas Workers Forever?

I wanted to talk a little bit about the IRS' Collection Statute Expiration date (CSED), or as we commonly refer to it in the outside world, the SOL (Statute of Limitations), what SOL were you thinking about? In other words, that is the last day that the IRS can come after you or your client for a tax debt.

It's actually rather complex to get the proper transcript that will tell you what your Collection Statute Expiration Date (CSED) is. The only thing you can draw from that is the the IRS doesn't want to make it super easy for you to find out exactly when they can stop collecting from you. The IRS DOES have limitations, which means they can't come after you for tax debt forever. With that said, I get Oil and Gas industry workers that come into my office and they say for instance, "Well, I haven't filed any taxes since 2008, so there is clearly no reason to right, because just like you say, the IRS has only 10 years to come after you." the Statute of Limitations (SOL) is 10 years and they think, "Well, since I haven't filed and I have laid low this whole period of time, can't I just forget about this problem?"

The answer to that is no, because the Collection Statute Expiration Date, the "CSED", that ten-year Statute of Limitations for the IRS doesn't begin to run against the IRS until you file and that tax has been, what they call "assessed". In other words, the IRS has processed the return, and they have sent you a bill if you owe. This criteria is what goes into this "assessment date", so it must be assessed before the "CSED", the statute of limitation begins to run. It is a very important thing to remember when you are trying to calculate your own Collection of Statute Expiration Date. Just remember, you have to file, they get a fair "crack at you" so to speak, within that 10-year Statute of Limitations, which doesn't begin to run, unless you file. So, just keep that in mind if you work in oil and gas.

What if I file bankruptcy? Will the SOL continue through this time period?

If you take bankruptcy, that will stop the Collection Statute Expiration Date (CSED) from running against the IRS. What that means, is that 10-year period doesn't run at all while you bankruptcy is pending. The court allows 180 days after the bankruptcy court wraps up your bankruptcy and gives you wither a discharge or a confirmed plan, so keep that in mind. If you choose bankruptcy, that is going to stop the CSED from running during that period of time.

Can I just wait this thing out?

Sometimes, yes you can. Sometimes, when they only have 6 months left, I certainly advise clients, let's make a conscious effort here to certainly watch the file. We may be able to wait out some tax years and let them fall off the face of the earth with the IRS, because if the IRS didn't collect it within the time that they had to collect it, they are SOL. They don't want to have to pay damages out for coming after somebody after the Statute of Limitations has run out and if an IRS official is assigned to the case and they let the Statute of Limitations run out, it is not good for them. They probably would lose their job if it was in their queue and they let the Statute of Limitations run out, it is not good for them. They probably would lose their job if it was in their queue and they let the statute of limitations just plain run. At my office, this is one of the very first things we do when we are dealing with a tax problem, is to figure out how long does the IRS have to come after the taxpayer and from that, everything just kind of falls in line.

Just make sure that you are getting with a tax professional to look at this Statute of Limitations if you have questions about that, so you are not just guessing. It is not a good thing to just let it go under the hopes that 10 years has possibly run out because again, it runs from the day that taxes are assessed and not just the day that the taxes would have been due. Do you know someone that is filing bankruptcy and unsure of their tax situation? How about whether or not the IRS is SOL? The IRS makes figuring out the CSED complex for a reason.

Travis Watkins is the Senior Tax Attorney for Travis W. Watkins Tax Resolution & Accounting Firm with offices in Oklahoma City, Tulsa and Dallas. His firm helps troubled taxpayers file old returns, negotiate with the IRS and stop immediate threats to their livelihood, so they can get a good night's sleep again. His firm deals with the IRS every day and, for that reason, has a unique perspective on IRS news and happenings. He can be reached at 1-866-843-2494. As a special offer to Linkedin users, you can get a free download of Travis' book, The Ultimate Survival Guide to IRS Problems," by calling toll free 800-721-7054 and leaving a message 24/7.