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

The statute of limitations is the time limit for the IRS to file charges or collect back taxes. The IRS statute of limitations on actions for back taxes depends on a few factors. The primary factor is whether a tax return was filed or not. In general, the time limit does not begin to run until a return has been filed. If no return was filed, the window stays open for the IRS to collect taxes, interest, and penalties.

Filed Tax Returns: Deadlines for Assessments and Collections

Generally, the statute of limitations for the IRS to assess taxes on a taxpayer expires three (3) years from the due date of the return or the date on which it was filed, whichever is later. A return is considered to be filed on the due date of the return if it was filed on or before its due date.

An assessment occurs when an IRS officer signs a certificate of assessment stating the amount owed by the taxpayer. Additionally, the IRS statute of limitations gets extended for an even longer time when there is a substantial omission (more than 25%) of gross income on the return. In these circumstances, the time limit for the IRS to make its assessment gets stretched out to six (6) years from the date the return is filed or deemed filed, whichever is later.

The IRS statute of limitations period for collection of taxes is generally ten (10) years. Once an assessment occurs, the IRS generally has 10 years to pursue legal action and collect on tax debt using the considerable resources at its disposal, which include levies and wage garnishments. However, the collection time can be extended in some situations.

Regardless of the circumstances, once a return is late or if the taxpayer fails to pay the full amount of taxes that are due, interest and additional penalties may apply. These vary depending on the severity of the mistake involved in a tax filing, as well as according to how late the payment comes in.

In addition to financial penalties, sometimes missed or erroneous filings can actually constitute a crime, raising the prospect of criminal penalties for a filer.

False, Fraudulent, or Missing Returns: No IRS Statute of Limitations

Not all tax penalties are limited to the 3-year statute of limitations. No deadline applies where the IRS can establish that a taxpayer has:

1. Filed a false or fraudulent return;
2. Willfully attempted to evade tax; or
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 on IRS action against tax fraud or tax evasion but there may be increased interest fees and penalties.

Tax fraud and evasion are criminal violations and offenders face the prospect of fines and jail time if the government prosecutes them for the offenses. Even when individuals fail to pay their taxes, the IRS generally prefers to resolve tax problems outside of the judicial system. Coming forward voluntarily and cooperating with the IRS to determine any taxes that are due and establishing a payment plan is a way to avoid criminal liability and get back into good standing with the IRS.

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

Worried About Unpaid Taxes? Contact an Attorney

If you have unpaid federal taxes and are wondering how long the statute of limitations is for collection actions, you may need legal help. As time passes, your options for repayment become more limited, so you'll want to act fast and contact an experienced tax attorney today.