Statute of Limitations

Posted on December 11, 2013

What are the IRS statutes of limitation in my tax case?

You’ve heard about statutes of limitations and typically they refer to personal injury type cases. Say you slip and fall at the store. You have a certain period of time to file a lawsuit against the store. The reason it is that way is kind of a fairness doctrine. People move, memories fade, and documents are lost therefore you have to do something within a certain period of time.

There is no different than in a tax case. If you file a tax return, the IRS has 3 years to audit you. If those tax returns under reported your income by 25%, than the IRS has 6 years to audit that tax return. If you committed fraud on the tax return than the IRS can audit that return at any time in addition to facing jail time.

On the collection side, the IRS has 10 years to collect money from you. Let’s say you file your tax return April 15th and the IRS makes the assessment against you. They have 10 years to collect that money from you. There are things that you can do to add to the 10 year statute including file an offer in compromise, file bankruptcy, and sign a waiver giving the IRS more time to collect money from you. If any of those things occur, the 10 year period is extended by virtue of whatever it is that you did. In a recent case our taxpayer owed $400,000 to the IRS.

We obtained internal documents from the IRS called transcripts of account that showed us that the statute of limitations was about to expire. We hunkered down for that 12 month period, allowed the statute to expire and now our taxpayer is free and clear of any liability to the IRS. We also got the federal tax liens released to boot.

Call us at 877-4-IRS-LAW where you’ll talk to a real lawyer who will answer your questions right away.