Collection Statute Expiration Date <\/strong><\/p>\n\n\n\n Internal Revenue Code section 6502 provides that the length of the period for collection after assessment of a tax<\/strong> liability is 10 years. The collection statute expiration ends the government’s right to pursue collection of a liability unless it seeks a judgement against the taxpayer which would extend the collection period for an additional 20 years. The date upon which the IRS can no longer collect the tax is referred to as the Collection Statute Expiration Date (CSED). <\/p>\n\n\n\n Dean v US<\/a><\/strong> (USCA11 Case: 20-14421<\/strong>)<\/p>\n\n\n\n Dean v US<\/em><\/a> involved a motion to dismiss a taxpayer\u2019s suit alleging that the IRS recklessly disregarded the law by continuing to levy on a taxpayer\u2019s Social Security payments beyond the ten year SOL on collections.\u00a0\u00a0The 11th Circuit Court of Appeals agreed with the district court’s finding that the IRS\u2019s actions were proper.\u00a0\u00a0<\/p>\n\n\n\n What Have We Learned from the Dean <\/em>Case?<\/strong><\/p>\n\n\n\n The case illustrates how the ten-year collection period does not prevent collection beyond the ten-year period when there is a timely levy relating to a fixed and determinable income stream<\/strong><\/span>.<\/p>\n\n\n\n Most taxpayers and tax professionals understand that the IRS will usually levy an automatic 15% on certain federal benefits, including social security (IRC Sec. 6331(h)). In the Dean<\/em> case, the IRS levy was made under IRC Sec. 6334(a)(9) whereby the SSA began paying over all <\/span>of the benefits slated for Dean to the IRS <\/strong>(subject to certain taxpayer exemptions).<\/p>\n\n\n\n Why All the Confusion?<\/strong><\/p>\n\n\n\n With the CSED expiring, the IRS filed a certificate of release of federal tax lien stating that Dean had \u201csatisfied the taxes,\u201d that the lien was \u201creleased,\u201d and authorized the proper IRS officer to \u201cnote the books to show the release of this lien.\u201d IRS also abated the assessments. It sure seems as if the 10-year CSED expired and the IRS collections have come to a halt<\/strong>. However, the IRS continued to levy Dean’s social security benefits which resulted in Dean filing a complaint in the district court alleging that the levy was an unauthorized IRS collection action.<\/p>\n\n\n\n Fixed and Determinable Levy Payment<\/strong><\/p>\n\n\n\n The IRS regulations under Section 6331 describe the relationship between a levy and fixed and determinable payments<\/strong>: \u201c[A] levy extends only to property possessed and obligations which exist at the time of the levy.\u201d 26 C.F.R. \u00a7 301.6331\u20131(a). \u201cObligations exist when the liability of the obligor is fixed and determinable<\/em> although the right to receive payment thereof may be deferred until a later date.\u201d<\/span><\/strong> The courts have ruled that:<\/p>\n\n\n\n An obligation is fixed and determinable \u201c[a]s long as the events which gave rise to the obligation have occurred and the amount of the obligation is capable of being determined in the future \u2026. It is not necessary that the amount of the obligation be beyond dispute.\u201d United States v. Antonio. <\/em>71A AFTR 2d 93-4578], *6 n. 2 (D. Haw. Sept. 24, 1991). Numerous cases establish that Social Security benefits are a fixed and determinable obligation of the SSA and are subject to one-time levies. <\/p>\n\n\n\n As the lower court opinion discusses, the 2013 levy created a custodial relationship between IRS and the SSA and as such the benefits came into constructive possession of the IRS<\/strong>. The regulations under Section 6343 also provide that \u201ca levy on a fixed and determinable right to payment which right includes payments to be made\u00a0after<\/em>\u00a0the period of limitations expires\u00a0does not<\/em>\u00a0become unenforceable upon the expiration of the period of limitations and\u00a0will not be released<\/em>\u00a0under this condition unless the liability is\u00a0satisfied<\/em>\u00a0.\u201d<\/strong> 26 C.F.R. \u00a7 301.6343-1(b)(1)(ii).<\/p>\n\n\n\n The Eleventh Circuit also helpfully explains the relationship between the levy and the benefits, directly refuting the claim that the collection occurred after the expiration of the SOL:<\/strong><\/p>\n\n\n\n Instead, the IRS seized his entire Social Security benefit\u2014that is, his \u201cfixed and determinable right to payment\u201d of his Social Security benefit in monthly installments\u2014immediately upon issuing the notice of levy in June 2013. <\/span>26 C.F.R. \u00a7 301.6343-1(b)(1)(ii); see Phelps, 421 U.S. at 337. Having seized his entire benefit before the expiration of the collection limitations period, the IRS was not required to relinquish it after the period expired<\/span><\/span>. See 26 C.F.R. \u00a7 301.6343-1(b)(1)(ii).<\/strong><\/em><\/p>\n\n\n\n The lower court opinion also nicely discusses the lack of legal significance of the IRS\u2019s abatement of the assessment and issuance of the release of federal tax lien. Both events did not change that Dean owed an underlying tax. As to the abatement, taxpayers are liable for the tax regardless of whether there has been an assessment. While the release of the federal tax lien affects the IRS\u2019s security interest, it did not release the levy and had no bearing on the underlying tax debt.<\/p>\n\n\n\n Disclosure <\/strong><\/p>\n\n\n\n We wish to thank Leslie Book, a professor at Villanova School of Law, for his posting to the Procedurally Taxing Blog which alerted us to the Dean<\/em> case.<\/p>\n\n\n\n <\/p>\n\n\n\n If you would like to discuss your business or personal tax planning<\/a>, tax preparation<\/a> and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601<\/a> today to make an appointment at our Exton PA CPA office<\/a> to discuss your situation. You can also schedule a consultation at Click Here<\/a>. <\/p>\n\n\n\n Copyright \u00a9 2021 Keystone Financial Solutions, Inc. All rights reserved. <\/strong><\/p>\n\n\n\n BE SURE TO READ THE DISCLAIMER PAGE: Tax laws, IRS rules and regulations change frequently<\/strong>. Although we hope you’ll find this information helpful, this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher shall not assume liability for any losses, injuries, or damages from the display or use of this information.<\/strong><\/p>\n\n\n\n About F. Bryan Haarlander, EA, CTRS:<\/strong><\/p>\n\n\n\n Bryan\nHaarlander is an IRS licensed Enrolled Agent and who owns and operates a\nspecialized tax services firm serving clients in the western suburbs of\nPhiladelphia, PA, which includes the cities of Chester Springs, Coatesville,\nCollegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia,\nPhoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks,\nChester, Delaware, Montgomery and\nPhiladelphia Counties, as well as clients in Delaware, New Jersey, New York and\nthroughout the continental USA. <\/p>\n\n\n\n
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