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What Is the IRS Statute of Limitations or Deadline for Action on Back Taxes?

Though the Internal Revenue Service has broad powers to collect back taxes, the U.S. Tax Code limits the amount of time the agency has to assess and collect unpaid taxes. The limited time the IRS has to collect is often called the statute of limitations period. The end of that period is known as the collection statute expiration date (CSED).

The statute of limitations is helpful to taxpayers—it keeps the IRS from going back and trying to collect taxes owed from income tax returns filed a long time ago. But some events can pause the limitations period. This gives the IRS longer to collect in certain situations.

There is no one statute of limitations in the Internal Revenue Code. The time period will vary depending on your situation. For example, the IRS generally has longer to collect when you intentionally fail to pay taxes than it does for minor unintentional mistakes. The limitations period also does not begin until you've filed a return. So, if you never filed a return for a tax year in which you owed taxes, the IRS has unlimited time to collect.

Limitation Periods for Filed Returns

Generally, the statute of limitations allows the IRS to assess taxes due for a tax year for three years from the due date of the return or the date it was filed, whichever is later. A tax assessment occurs when an IRS officer signs a certificate of assessment stating that a taxpayer owes the IRS money and the amount owed. If you file your return early, the IRS will treat it as having been filed on its due date, usually April 15. So, filing your return early won't shorten the period the IRS has to assess unpaid taxes.

Additionally, the statute of limitations gets extended when there is a substantial omission (more than 25%) of a taxpayer's gross income on their return. In cases of a substantial omission, the IRS has six years from the date the return is filed or deemed filed, whichever is later.

Limitation Period for Collection

The IRS usually has a 10-year period to collect taxes that have been assessed. The agency has considerable resources at its disposal for collecting tax debts, which include levies and wage garnishments. But the collection period can be extended in some situations.

Note that the 10-year statute of limitations for collection is measured from the date the IRS assessed the taxes, not the date the taxpayer filed their return. For example, if you filed tax returns in 2020 and the IRS assessed additional taxes in 2022, the IRS would have until 2032 to collect, which is 12 years after the returns were filed.

Interest and Penalties

Regardless of the circumstances, if a return is late or the taxpayer fails to pay their full tax liability when it is due, interest and additional penalties may apply. The penalty amount will vary depending on the severity of the mistake and how late you make the payment.

In addition to financial penalties, sometimes a missed or erroneous filing will be considered a crime. This raises the possibility of the filer facing criminal penalties.

False, Fraudulent, or Missing Returns: No Limits for IRS

Not all tax penalties are limited by the three-year statute of limitations. The IRS has no deadline for assessment and collection if the taxpayer has:

  1. Filed a false or fraudulent return
  2. Willfully attempted to evade tax
  3. Failed to file a return

False or fraudulent filing or tax evasion involves willfully filing false tax information, failing to file, or attempting to evade taxes. Not only will there be no time limit for the IRS to take action against tax fraud or tax evasion, but there may be increased interest fees and penalties.

Tax fraud and evasion are both criminal violations of federal law. Taxpayers convicted of either crime face the prospect of fines and jail time. But the IRS generally prefers to resolve tax problems outside of the judicial system, without pushing for criminal charges. As a result, coming forward voluntarily, cooperating with the IRS, and establishing a payment plan will often allow you to avoid criminal charges and get back into good standing with the IRS.

Learn more about What To Expect If You Don't Pay Your Taxes.

Extended Limitations Periods

In certain situations, the IRS can pause the limitations period so that it has longer to collect. This is known as "tolling" the limitations period. It's often the result of a taxpayer challenging an assessment or IRS collection action. There are cases where a taxpayer has repeatedly appealed IRS determinations, so the limitations period was extended for more than a decade.

Common events that will extend the three-year limitations period for assessment include:

  • The taxpayer challenges an IRS deficiency finding in the U.S. Tax Court
  • The taxpayer declares bankruptcy

The most common reasons the 10-year limitations period for collection is suspended include:

  • The IRS is considering the taxpayer's request for an installment agreement and the time the taxpayer may spend appealing the agency's decision
  • The taxpayer files for bankruptcy
  • The IRS is considering the taxpayer's offer in compromise (OIC) or any appeals of the agency's OIC decision
  • The taxpayer has requested a collection due process (CDP) hearing
  • The taxpayer is serving in the military
  • The taxpayer lives outside of the United States

The taxpayer can also sign a waiver extending the limitations period if it will keep the IRS from taking action simply because the limitations period is about to expire. This may give the taxpayer longer to work out their issues with the agency without being subjected to an assessment or collection action.

Additional Questions? Contact an Attorney

If you have unpaid federal taxes or have received notice that you owe the IRS taxes, and you believe the collection period has expired, a local tax lawyer can help. A tax attorney understands how the limitations periods apply in different situations. They also know how to stop the IRS from collecting after they have expired. Even if the IRS can still collect on the debt, a tax lawyer can help resolve your outstanding tax bill by working with the agency.

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