Enrolled Agent Course Summary on IRS Collection of Back Taxes
November 15th, 2010 | 
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When enrolled agents represent taxpayers for past tax years, the most important issue to consider is expiration of the collection period. The IRS generally has 10 years from the date of a tax assessment to complete the collection process. Back taxes assessed for longer than that are no longer payable.
Absent a few specific IRS actions that can extend the 10 year period, taxpayers may obtain relief from owing tax by simply waiting until the expiration date. At that time, they can also acquire a release of any tax lien the IRS previously filed.
One situation that extends the 10 year IRS collection period occurs when a taxpayer agrees in writing to allow the IRS more time. Other cases that give the IRS extra time to collect back taxes are taxpayer bankruptcy filing during the 10 year period, taxpayer filing of an offer in compromise during the 10 year period, taxpayer application for an assistance order during the 10 year period, and taxpayer request for a collection due process hearing during the 10 year period. So using your enrolled agent CPE to accomplish any of these actions on a taxpayer’s behalf does affect the tax collection expiration date.
Individuals need to obtain professional representation to determine the best strategy for dealing with tax collection deadlines. These are opportunities for you to promote your status possessed from passing the enrolled agent exam. You can obtain a taxpayer’s authorization to gather from the IRS a record of the person’s account and tax transcripts.
Taxpayers who have not filed tax returns for several years need an assessment of whether they are possibly entitled to some tax refunds. The expiration date is different in these cases. Taxpayers are only entitled to unclaimed refunds of overpaid tax for 3 years.
In many cases, using refunds for any of the preceding 3 years is a sound avenue to satisfy tax liability for other years. One of the advantages you can demonstrate to people for hiring you is that your enrolled agent course trained you in all aspects of tax return preparation. As an enrolled agent you can serve the dual role of tax preparer and taxpayer representative with the IRS.
The 3 year period is also the length of time that the IRS has to audit tax returns. However, the expiration period ends three years after the tax return is filed. Therefore, filing a 2006 tax return on July 31, 2011, means that the IRS has until July 31, 2014, to audit the return.
But there are also exceptions to the statute of limitations on audits. The IRS can audit a tax return for up to 6 years after determining that income is understated by at least 25 percent. In addition, a fraud allegation by the IRS opens a tax return to audit regardless of its date. Avoiding these traps is yet another reason for inspiring a taxpayer to use the services of anenrolled agent.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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Tags: Bankruptcy Filing, Expiration Date, Extra Time, Offer In Compromise, Tax Refunds