Statutes of limitations are laws that limit how long someone has to bring a legal claim. The IRS must abide by various statutes of limitations when it comes to assessing taxes and trying to collect them from taxpayers.
If the statute of limitations has run in your case, you may be able to have your tax liability eliminated without having to pay it. This is an important tax resolution strategy that many taxpayers aren’t aware of.
Statute of Limitations on Tax Assessment
Before the IRS can try to collect from you, they must assess a tax liability. This is the official process of documenting how much you owe in taxes.
The general tax assessment period is three years from the tax return due date. This is also an important date for tax audits because the IRS audits returns with the intention of assessing more tax if an error is found.
There some situations where the assessment statute of limitations is extended. If you understate your income by more than 25%, the IRS has six years to audit your return.
If you commit tax fraud, the IRS has an unlimited amount of time to audit your return. However, the burden of proof is on the IRS to show you intentionally violated the tax laws.
If you don’t file your tax return, the statute of limitations never starts running, so the IRS also has an unlimited time period to assess tax.
Statute of Limitations on Tax Collections
The Collections Statute Expiration Date (CSED) is generally ten years from the date the tax was assessed. If you owe back taxes for several tax years, each year will have its own CSED, which you can see by looking at your tax transcripts.
Long before the ten-year collections period expires, you’ll either have to resolve your tax problems or deal with IRS enforced collection actions, such as:
- Federal tax liens
- Bank Account Levies
- Wage garnishments
- Passport revocations or denials
- Tax refund offsets
The ten-year period can also be extended in some cases. For example, if you submit an Offer in Compromise or an installment agreement request, the CSED will be extended to account for the time the IRS was considering your request, plus an additional 30 days.
Contact a tax attorney if you think the IRS is trying to collect taxes that are beyond or nearing the Collections Statute Expiration Date.
The Gartzman Law Firm offers tax settlement help for both federal and state tax debt. Use our contact form to request a consultation with an Atlanta tax resolution attorney.