When working with the IRS, one can get lost in the alphabet soup of the references tossed about as easily as a baseball on a little league field... it’s a little all over the place. There are three acronyms, however, that you should know and understand to best serve yourself or your clients: ASED, RSED, and CSED. These acronyms apply to all types of taxes reported and paid to the IRS: income tax, payroll tax, unemployment tax, etc.

Let’s start with ASED. ASED stands for Assessment Statute Expiration Date. In plain English, this acronym represents the end of the timeframe the IRS has to assess the tax due on a tax period. In most situations, the IRS has three years from the date a tax return is received or three years from the due date of the original return (whichever is later, of course!) to make an assessment of tax. As with all things IRS-related, however, a few asterisks comes into play:

• If the taxpayer fails to file a tax return voluntarily, the IRS will compile an “estimated” return through the Substitute For Return (SFR) program. Under these rules, the SFR does not start the three-year clock ticking, and the IRS can continue to assess additional tax due as applicable. If this happens, and the taxpayer then voluntarily files their tax return, that action triggers the three-year ASED notation on the tax period effective the date the IRS receives the return.
• If the taxpayer did not report more than 25% of their gross income on the tax returns, the three-year ASED increases to six years from the date the IRS received the return.
• The IRS can contact a taxpayer and propose a statutory waiver or extension agreement be agreed upon to extend the three-year statute. On a side note: the taxpayer does have some power in this situation. They can refuse to sign the waiver/extension or limit the time granted.
• And finally, if the IRS finds that the taxpayer filed a false or fraudulent return with the intention of evading tax, no ASED is recognized, and the IRS has an unlimited amount of time to assess tax for every period deemed applicable.

So, keep track of those tax return submission dates! When you submit a tax return via mail instead of e-filing, make sure to send it via certified mail and keep the receipt along with a printed copy of the delivery notification with your tax return records. By doing so, you could protect yourself or your client from additional taxes assessed.

Now let’s look at RSED: the Refund Statute Expiration Date. This acronym stands for the date identified as the last time a taxpayer can claim a valid credit or refund request. Failure to claim the refund or credit by this date means that the taxpayer may no longer be entitled to it.

Asterisks abound in a general way concerning the RSED. In most cases, a taxpayer has three years from the date they originally filed a tax return, or two years from the date the tax was paid, to claim a credit or refund. The first asterisk we encounter is that this general rule has a “whichever is later” notation. There is also another common asterisk to keep in mind: if the taxpayer files a claim after the three-year period but within two years from the time they paid the tax, the credit or refund cannot be more than the tax paid within the two years immediately before the claim was filed. The last asterisk that should be noted without having to dig too far into the Internal Revenue Manual is that the time period for filing a claim for refund may be accepted if the claim is filed regarding something like a bad debt or worthless security. Need more information on that? See IRS Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund.

The last acronym we want to make sure you understand is CSED, which stands for the Collection Statute Expiration Date. This is a biggie in our world of tax debt resolution! The CSED is the last date the IRS has to collect on a tax debt recorded on a taxpayer’s account. On the day immediately following the CSED on a tax debt, the IRS loses its right to collect the monies owed.

The CSED starts ten years from the date a past-due tax debt is recorded on an account. Think of it as a giant ticking clock. However, as with most things with the IRS, there are asterisks which are specific actions taken by the taxpayer, or their assigned representative, that can pause the ten-year clock’s ticking:

• Filing of a Collection Due Process Hearing,
• Pending Installment Agreement,
• Filing of an Offer in Compromise, and more.

If you are concerned that actions have been taken that have “tolled the statute,” a.k.a. paused the ticking of the clock, call the IRS and ask for the updated CSED. The IRS computer system has been known to tabulate the CSED incorrectly, so if the date you are provided doesn’t seem correct, ask for a “Tax Mod A” transcript. That detailed report will provide the dates the concerning actions were taken and when they were released, then grab your calendar to start counting down the days.

If you or your client has a tax debt and the acronyms mentioned in this article alone make you break into a cold sweat, give the team at Golden Lion Tax Solutions a call! With over 23 years of experience handling IRS and State past-due tax accounts for payroll taxes, income taxes, sales taxes, and more, we have the knowledge and experience needed to ensure your tax debt is addressed properly and in the most effective way for your short- and long-term interests.

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Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.