The IRS Statute of Limitations – In most cases, the IRS may “assess additional tax” for the last three tax years, but that doesn’t mean they can’t look

  1. Under IRC section 6501(a), the statue of limitations (SOL) for assessment of taxes expires three (3) years from the due date of the return or the date that you file your return, whichever is later. Extending the due date for filing the return does not change the date the SOL starts to run.
  2. The IRS statute of limitations does begin to run until you file your return, even if it relates to a year long past. In such cases the taxes can be assessed at any time.
  3. The statute does not run if you file a false or fraudulent return or are willfully attempting to evade tax. Here too the tax may be assessed or collected at any time.
  4. If you substantially understate your gross income (more than 25%), the IRS statute of limitations is extended to six (6) years.
  5. With respect to collections, the IRS generally has ten (10) years after the date of the assessment of tax or levy to collect. That applies to assessments made after November 5, 1990.

There are other exceptions and special circumstances that affect the IRS statute of limitations. If you’ve been outside of the US for a significant period of time, for example, or agreed to an extension with IRS, your SOL deadlines may be different. The rules governing the statues of limitations begin at IRC Section §6501.

Audit Tip For Tax Practitioners: Always be aware of the statutes of limitations for years adjoining your client’s audit years. The examiner may wish to “open up” prior years that have closed.  Also, the IRS may examine tax returns extending well before the three year assessment period, even if no exception applies, to gain additional information about the taxpayer and his affairs.

Ari Good has considerable experience in federal income and excise tax issues, and in state sales, use, property, intangibles and franchise tax matters. Good Attorneys At Law, PA defends taxpayers facing tax audits in industries ranging from aviation to hospitality. Mr. Good has a proven track record in complex tax transactions and in serving businesses of all sizes.