Statute of Limitations
What Is a Statute Of Limitations?
The statute of limitation is the time period established by law for the IRS to assess, review and resolve any tax related issue. Once the time period passes, the IRS forfeits any claim to additional taxes, interest, penalties, fees or collection actions. Likewise, the tax payer forfeits any claims for refunds. How can the statute of limitations impact your tax debt situation?
There are three different types of statutes of limitation:
The Refund Statute
This statute applies to your tax return and how long you have to claim a refund. You are able to claim a refund for a filed tax return within three years. It is from the date the return was due or two years after you have paid the tax.
The Assessment Statute
This statute applies to how long the IRS is able to audit or charge you additional taxes. It applies on any tax return year. This is typically three years from the date in which the tax return was due or two years from when you paid the tax.
The Collection Statute
This applies to how long the IRS is able to collect any outstanding tax balance that you owe. This statute is the longest of the three. The IRS has 10 years from the date which they assessed the tax to collect on the tax debt.
Are There Any Circumstances Where The Statute Of Limitation Does Not Apply?
There are very few circumstances in which a statute of limitation does not apply; however, if you file a fraudulent tax return, did not file a tax return for a year in which you should have or attempt to evade paying your taxes, there is no statute of limitation for collection for these circumstances. If you match any of these scenarios it is best to try and resolve the issue so that the statute of limitation may apply.
Why Do I Need To Know About The Statute Of Limitation? Does It Really Help Me?
The statute of limitation may not seem too important, especially when the collection statute of 10 years may seem like a long time. However, the statute of limitation comes in handy for many scenarios. For example, the collection statute applies to many IRS debt relief options such as:
Essentially, any tax debt relief mechanism offered by the IRS makes it so that the statute of limitation becomes extended and the beginning date starts when you filed or were approved for the mechanism.
There are number of benefits regarding the statue of limitations. Be sure to discuss them when discussing your situation with a tax professional. In the case of your tax refund, a tax professional may be able to look back on previous tax returns. They can provide you with a refund or a large sum of money from your tax refund for previous years. That is as long as you meet the statute of limitation for those tax returns. It is also helpful to consult with a tax professional if you are in any tax debt to see if you have met the statute of limitation for any outstanding debts. Call us today to discuss your tax situation and see what we can do to help you. Please visit our page for our full list of IRS tax resolution services.