Taxpayers often want to know how long the IRS has to audit and assess additional tax on their tax returns. For taxpayers who reported all their income, the IRS has three years from the date of filing the returns to examine them. This period is known as the statute of limitations. However, when dealing with taxes, it is not always that simple. Here are some complications:
You file before the April due date – If you file before the April due date, your return is considered to be filed on the due date and the three-year statute of limitations still begins on the following day. For example, whether you filed your 2018 return on February 15, 2019 or April 15, 2019, the statute did not start running until April 15, 2019.
You file after the April due date – The assessment period for a late-filed return or one filed under an extension starts on the day after the actual filing. Thus, extending the due date does not shorten the assessment period. For example, your 2018 return is on extension until October 15, 2019 and you actually file on September 1, 2019. The statute of limitations for further assessments by the IRS will end on September 1, 2022. So the earlier you file those extension returns, the sooner you start the running of the statute of limitations.
You file an amended tax return – If after filing an original tax return you subsequently discover you made an error, an amended return is used to make the correction to the original. The filing of the amended tax return does not extend the statute of limitation unless the amended return is filed within 60 days before the limitations period expires. If that occurs, the IRS generally has 60 days from the receipt of the return to assess additional tax.
You understated your income by more than 25% – If you underreport gross income by more than 25%, the three year statute of limitations increases to six years. The limitations period is extended with respect to your entire tax liability for the year, not just the omitted items of income.
These “omissions” don’t include amounts for which adequate information is given on the return or attached statements.
You file three years late – Suppose you procrastinate and you file your return three years or more after the April due date for that return. If you owe money, you will have to pay what you owe plus interest and late filing and late payment penalties. If you have a refund due, you will forfeit that refund. No refunds are issued three years after the filing due date.
No statute of limitations – If you fail to file a tax return or file a fraudulent return with intent to evade tax, the IRS can assess tax at any time. If the IRS asserts you have filed a fraudulent return with the intent to evade tax, it must prove its case in order to assess tax under the unlimited limitations period.
10-year collection period – Once an assessment of tax has been made within the statutory period, the IRS generally 10 years after the assessment to collect the tax.
If you are behind on filing your returns and would like to get caught up, or you discovered you omitted something from your original return and would like to file an amended return, please call us at 866-550-7655. If you are facing an IRS audit or the IRS is attempting to collect back taxes from you, we can help with that as well.