Statute of Limitations

What Is a Statute Of Limitations?

A 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 is no longer able to allow a claim for refund by a taxpayer, assess additional taxes or take collection action.

 

There are three different types of statutes of limitation:

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 return within three years from the date the return was due or two years after you’ve paid the tax.
The Refund Statute
The Assessment Statute

types of statutes of limitation

The Assessment Statute

This statute applies to how long the IRS is able to audit or charge you additional taxes on any tax return year. This is typically three years from the date in which the return was due or two years from when you paid the tax

The Assessment Statute

types of statutes of limitation

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 it.

The Collection Statute

Are There Any Circumstances Where The Statute Of Limitation Does Not Apply?

There are very few circumstances to which a statute of limitation doesn’t apply; however, if you file a fraudulent tax return, didn’t 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 in regard to the collection statute as 10 years may seem like a long time but 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 becomes from when you filed or were approved for the mechanism.

Next Steps:

When it comes to the statute of limitation, there are a number of benefits to discussing your tax situation with a professional. In the case of your tax refund, a tax professional may be able to look back on previous tax returns and provide you with a refund or a large sum of money from your tax refund for previous years before you meet the statute of limitation for those tax returns. It is also helpful to speak to a professional if you are in any tax debt to see if you have hit 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. See our full list of IRS tax resolution services.

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