The Internal Revenue Service (IRS) has a time limit on when they can collect taxes. This time limit, referred to in the legal world as a statute of limitations, is generally set at ten years from the date the federal government assess the taxpayer’s tax bill. It is important to note the law generally begins marking the time that passes at the date of assessment not filing. The government generally defines the filing date as when the taxpayer completes and turns in their tax returns. In contrast, assessment occurs when an officer in the office of the Secretary of the Treasury records and signs off on the tax bill.
Tax law generally requires the IRS to complete the tax assessment process within three years of the tax filing. In most cases, assessment only takes a few weeks after the government receives the tax filing. However, there are some situations that can increase the time this process takes and result in an extension to this three-year rule. One example: concern the taxpayer understated their income by 25% or more.
What other factors impact the time limit for tax collection efforts?
The tax collection statute of limitations may be extended if the taxpayer files for bankruptcy, requests a Collection Due Process hearing or is in payment negotiations with the IRS. These payment negotiations could include filing for an offer in compromise or proposing an installment agreement.
What else should taxpayers know about this statute of limitations?
These time limits are complicated. Those who are attempting to navigate these issues do not need to determine the impact of the rules on their situation alone. The attorneys at Goldburd McCone are familiar with these rules and can guide you through the process.