Your Statute of Limitations for an IRS Tax Audit
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The wise taxpayer will always ask his or her tax lawyer or tax audit representative in cases like tax audit cases first about the statute of limitations in the case. At its simplest, a statute of limitations is just what it says–a limit on the amount of time the IRS has to perform a particular task, like audit taxes or collect taxes. And, it is set by statute, hence “statute of limitations.”
What is the purpose of the statute of limitations? Well, the statute of limitations (SOL) is an absolute bar to IRS action. For this reason IRS agents are trained to carefully watch the SOL in their cases to make sure the time limit on finishing an IRS audit, for example, doesn’t run out.
We’ll be talking in this post about two statutes taxpayers really should know about. The first is the statute of limitations on assessment; the second is the statute of limitations on collection.
Statute of Limitations on Assessment, Internal Revenue Code Sec. 6501.
The SOL on assessment is the time limit on which the IRS can review your file and say, “Aha! You owe this dollar amount in taxes.” Put another way, an assessment is the IRS official act of creating a balance due for a taxpayer. For IRS tax audits this usually happens after the audit + appeal is completed. Also, the assessment begins the collection process, something not all taxpayers realize. The general SOL on assessment is three years from the date the return was actually filed. Here’s the sticking point however: the SOL does not run at all if you have either failed to file a return or if you filed a fraudulent return. This being said, the IRS then can go back three years if you filed the last three years on time and without committing fraud. If there was fraud then the IRS is unlimited in how far back it can go. Now you know about the SOL on assessment.
Statute of Limitations on Collection, Internal Revue Code Sec. 6502
The IRS can collect taxes up to ten years after assessment. “Assessment” see the paragraph above. Today’s law since 1998 says that the IRS can extend this SOL only where there is in place an installment agreement that itself doesn’t pay out until after the ten years has run–then the SOL extends ten years plus the installment agreement payoff date.
ABOUT THE AUTHOR: John Ellsworth, Esq.
With over 35 years practical experience in complex forensic accounting, John Ellsworth has handled thousands of personal, business and corporate audits, negotiated many successful offers in compromise and has had experience in international taxation including offshore entities and controlled foreign corporations.
Copyright Ellsworth Law Group
More information about Ellsworth Law Group
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
We’ll be talking in this post about two statutes taxpayers really should know about. The first is the statute of limitations on assessment; the second is the statute of limitations on collection.
Statute of Limitations on Assessment, Internal Revenue Code Sec. 6501.
The SOL on assessment is the time limit on which the IRS can review your file and say, “Aha! You owe this dollar amount in taxes.” Put another way, an assessment is the IRS official act of creating a balance due for a taxpayer. For IRS tax audits this usually happens after the audit + appeal is completed. Also, the assessment begins the collection process, something not all taxpayers realize. The general SOL on assessment is three years from the date the return was actually filed. Here’s the sticking point however: the SOL does not run at all if you have either failed to file a return or if you filed a fraudulent return. This being said, the IRS then can go back three years if you filed the last three years on time and without committing fraud. If there was fraud then the IRS is unlimited in how far back it can go. Now you know about the SOL on assessment.
Statute of Limitations on Collection, Internal Revue Code Sec. 6502
The IRS can collect taxes up to ten years after assessment. “Assessment” see the paragraph above. Today’s law since 1998 says that the IRS can extend this SOL only where there is in place an installment agreement that itself doesn’t pay out until after the ten years has run–then the SOL extends ten years plus the installment agreement payoff date.
ABOUT THE AUTHOR: John Ellsworth, Esq.
With over 35 years practical experience in complex forensic accounting, John Ellsworth has handled thousands of personal, business and corporate audits, negotiated many successful offers in compromise and has had experience in international taxation including offshore entities and controlled foreign corporations.
Copyright Ellsworth Law Group
More information about Ellsworth Law Group
View all articles published by Ellsworth Law Group
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
