When a client sits down in our office after discovering a tax lien, one of the first questions is almost always the same: how long can a tax lien last?
The answer depends entirely on who filed it. Across our California and Nevada offices, we routinely deal with five different agencies that record tax liens: the Internal Revenue Service, California Franchise Tax Board (FTB), California Department of Tax and Fee Administration (CDTFA), California Employment Development Department (EDD) and Nevada Department of Taxation. Each operates under its own rules for how long a debt can be collected and what can stop or extend that timeline.
After more than 40 years representing taxpayers in collection matters, I can tell you that these deadlines are some of the most misunderstood and most important parts of tax resolution. Knowing exactly when an agency’s right to collect runs out can completely change the strategy of a case. In some situations, taking action on an old tax debt without first calculating the statute can actually give the government more time to collect it.
A Tax Lien and a Collection Statute Are Not Quite the Same Thing
Before looking at each agency, it helps to separate two concepts that are often confused.
A tax lien is the government’s legal claim against your property and rights to property because of an unpaid tax debt. A collection statute is the period during which the agency is legally allowed to pursue collection through tools such as levies, garnishments, seizures and lawsuits.
With the IRS, those two clocks are closely connected. When the federal collection period expires, the lien generally becomes unenforceable as well. California and Nevada can work differently because the life and renewal of the lien itself may play a much larger role in how long the agency can continue pursuing the debt.
How Long Can a Tax Lien Last With the IRS?
The federal tax lien arises after the IRS assesses a tax, sends notice and demand for payment and the taxpayer fails to pay. The IRS may then file a Notice of Federal Tax Lien to publicly establish its claim against the taxpayer’s property.
Under Internal Revenue Code §6502, the IRS generally has 10 years from the date of assessment to collect a tax liability. This is commonly called the Collection Statute Expiration Date, or CSED. Importantly, every tax period and separate assessment can have its own CSED. If an additional amount is assessed after an audit, for example, that assessment may have a different expiration date than the original balance.
The 10-year period also is not necessarily 10 straight calendar years. Certain events can suspend the collection clock, including bankruptcy, a pending Offer in Compromise, some installment agreement requests, Collection Due Process proceedings, certain innocent spouse claims and extended periods outside the United States. Litigation can also significantly extend the government’s ability to collect.
That is why we calculate the statute from the account history rather than simply looking at the age of the tax year.
California Franchise Tax Board
California’s Franchise Tax Board generally has a 20-year collection period under Revenue and Taxation Code §19255, but the way California calculates that period creates an important complication.
The statute generally runs from the date the latest tax liability for a taxable year becomes due and payable. The word latest matters. FTB takes the position that certain later assessments or fees connected to the same tax year can affect the collection period. In FTB’s own published examples, a later collection fee can move the starting point of the 20-year period.
As a result, a California income tax debt that is more than 20 years old is not necessarily beyond collection. You have to review the complete account history to determine what was assessed and when.
The FTB statute can also be suspended in a number of circumstances, including bankruptcy, certain litigation and installment agreements. That last point is especially important because California treatment differs from the federal rules in significant ways. Entering into a payment plan without understanding the statute can sometimes have consequences a taxpayer did not expect.
California Department of Tax and Fee Administration
CDTFA primarily handles sales and use taxes along with a number of special taxes and fees. Its collection rules are quite different from the more familiar IRS statute.
When an amount becomes due and payable and is not paid, California law can create a state tax lien even before a Notice of State Tax Lien is recorded. Once CDTFA records a lien, it generally remains effective for 10 years and may be renewed.
Unlike the IRS and FTB, there is not a single general collection statute that neatly says CDTFA must stop collecting every liability after a certain number of years. Instead, its enforcement ability depends heavily on the life of the lien and the deadlines attached to particular collection remedies.
For that reason, the recording history becomes extremely important in older CDTFA cases. We want to know when the lien arose, when notices were recorded and whether renewals and other enforcement actions occurred within the required time periods. A missed deadline can materially affect what CDTFA can still do.
California Employment Development Department
EDD administers payroll-related obligations including unemployment insurance, State Disability Insurance, Employment Training Tax and California personal income tax withholding.
When an employer fails to pay an amount when it becomes due, the liability can become a perfected state tax lien. According to EDD’s published guidance, a Notice of State Tax Lien generally must be recorded within 10 years after the lien arises. Once recorded, it is generally valid for 10 years and may be extended in additional 10-year increments.
As with CDTFA, the lien and enforcement history matter enormously. EDD also presents an additional concern for business owners because certain unpaid payroll taxes can potentially result in personal liability for responsible individuals. An old EDD debt therefore should not be assumed to simply disappear with time.
Nevada Department of Taxation
Nevada does not have an individual state income tax, so Department of Taxation liens typically involve business taxes such as sales and use tax, Modified Business Tax and Commerce Tax.
Under Nevada law, the Department may generally record a certificate of delinquency within four years after a tax or fee becomes due. Once recorded, the lien lasts five years. The Department can extend it by recording another certificate before the existing lien expires, adding another five-year period.
There is not a simple rule that every Nevada tax lien disappears after five years. If the Department continues to renew the lien on time, it can remain in place much longer. On the other hand, if the Department misses the initial filing deadline or fails to renew a lien before it expires, that can significantly affect its collection rights.
How the Agencies Compare
As a general starting point, the IRS typically has 10 years from assessment, subject to events that suspend or extend the statute. FTB generally works with a 20-year collection period, although later liabilities and suspensions can substantially affect that calculation. CDTFA liens generally operate in 10-year periods and can be renewed, while EDD liens may also be extended in 10-year increments. Nevada Department of Taxation liens generally last five years at a time but can be renewed for additional five-year periods.
Those are useful general rules, but they are not enough to determine the expiration date of an actual case.
For every older liability we review, we want the underlying account records and lien history. We calculate each relevant date, identify anything that may have suspended the statute and determine whether the agency preserved its collection rights properly. We do not simply rely on the age of the tax year or assume that the agency’s computer system tells the entire story.
That analysis can affect whether it makes sense to enter a payment agreement, submit an Offer in Compromise, challenge a collection action, wait, negotiate or take another approach entirely.
Before You Take Action on an Old Tax Debt
If you have a tax liability that has been sitting there for many years, do not assume either that it will disappear soon or that the government can pursue it forever.
The answer may depend on an assessment made years after the original return, a bankruptcy that stopped the clock, an old payment agreement, a later FTB fee or a lien renewal that either was or was not filed on time. Sometimes a few dates buried in an account transcript or county recording history change the entire case.
At Tax Crisis Institute, we have been handling IRS, California and Nevada collection matters for more than four decades. If you have an older tax lien or tax balance and want to understand what the agency can still legally do, contact us at (714) 794-4680 or Dana@taxcrisisinstitute.com for a confidential review.
This article is for general informational purposes only and is not legal or tax advice for any specific situation. Tax laws, statutes and agency policies can change. Consult a qualified professional regarding your individual circumstances.