Statute of Limitations and What it Really Means

You’ve probably heard the term statute of limitations before.

But like most IRS terminology, it can be confusing and needs further explaining to understand what it really means. If you are faced with an IRS problem, the term statute of limitations applies to you in the sense that the problem has a time limit. The IRS can only collect on your taxes for 10 years from the date of the assessment of the tax. Also, there is a time limit on audits, which is three years from the date of the filing of the tax returns.

Before exhaling a sigh of relief, it’s important to know that there are factors that can extend these time periods. It all depends on your specific situation and what actions have been taken thus far. Actions such as requests for due process hearings or filings of offers in compromise or bankruptcy will determine when your statute of limitations actually expires.

In order for the statute of limitations to begin running, you MUST file a tax return or have a tax assessment for that particular tax period.

Once you file your tax return, the IRS has three years to audit. After three years, the IRS cannot initiate an audit unless there is suspicion of tax fraud. The same goes for ten years to collect outstanding tax liabilities. In order to know the right way to go about dealing with your tax debts, it’s best to hire a tax attorney who can learn your history and find the optimum solution for you. The clock is ticking!

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