THREE-YEAR STATUTE: AUDITS AND ASSESSMENTS

The statue of limitations (SOL) for assessment of taxes expires three years from the later of a tax return's due date or the date it was actually filed. However, a return is deemed filed on the due date of the return if filed on or before such due date. An extension of time to file a return does affect the date the SOL starts to run.

Note that certain conditions or events effectively extend the SOL. For instance, the utilization of a Net Operating Loss (NOL) may have the practical effect of extending the SOL on the return for the year in which the NOL arose.

SIX-YEAR STATUTE: SUBSTANTIAL UNDERSTATEMENT

The SOL for assessment or collection is six years from the later of a tax return's due date of the return or the date it was actually filed when there has been a substantial omission (i.e., more than 25 percent) on the return of gross income.

INDEFINITE STATUTE

The IRS may assess or collect tax at any time in the following circumstances:

• Filing a false or fraudulent return

• Willful attempt to evade tax

• Failing to file a return

EXTENSIONS

The IRS may assess or collect tax at any time prior to the expiration of the period agreed upon by the IRS and a taxpayer pursuant to a written extension of the statute of limitations.

STATUTORY NOTICE OF DEFICIENCY

The issuance of a Statutory Notice of Deficiency by the IRS suspends the statutory period of limitations during the 150 days following the issuance of the notice. The 150 days consists of the following: - Ninety (or 210) days for the taxpayer to petition the Tax Court, plus - Sixty days for the IRS to process the assessment.

COLLECTIONS

Generally, the IRS cannot collect or levy any tax 10 years after the date of assessment of tax or levy.

REFUNDS

A taxpayer may make a claim for credit or refund of an overpayment of any tax within 3 years from the time the tax return was filed or 2 years from the time the tax was paid, whichever is later. If no tax return was filed, the taxpayer may file the claim within 2 years from the date that the tax was paid.   

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