Understanding IRS Statute Of Limitations

When dealing with an old tax return, sometimes people wonder just how long the IRS has to come after them for the tax.  Sometimes people want to know how long they have to claim their refund.  Other times people want to know what happens if there was a mistake.  The short answer? It all depends.

Filed Tax Returns:

Deadline for Assessment

However, the IRS has six (6) years to assess additional taxes if:

  • You omitted income that adds up to more than 25% of the income you reported on your return OR
  • You fail to included foreign financial assets that breached the reporting thresholds

Deadline For Collections
The IRS statute of limitations period for the collection of taxes, known as the Collection Statute Expiration Date (CSED), is generally ten (10) years. Thus, once an assessment occurs, the IRS has 10 years to collect.  If they can’t collect within the time frame then the taxes simply just vanish as a result of being discharged.

Unfiled, False or Fraudulent Returns:

Deadline to Claim Your Refund
The deadline for you to claim a refund on a tax return in which one was owed to you is 3 years from its due date (excluding extensions).  For example, if you were due a refund on your 2011 Income Tax Return (which was due April 15th 2012), you have until April 15th 2015 to claim it.  If you don’t file a claim for a refund within three years, the money becomes property of the U.S. Treasury.

Note, there are no interest and penalties for failing to file a return in which a refund was owed.  However, if you have a balance due, those items can be pretty stiff as outlined in this post.

No Statute Situations
The IRS has an “unlimited” amount of time to assess taxes against a taxpayer if they can establish that they:

  1. Simply failed to file a return;
  2. Filed a false or fraudulent return; or
  3. Willfully attempted to evade tax