What is the IRS audit statute of limitations? Is there a time limit placed upon the IRS when it comes to auditing your tax returns or collections of tax related debt? The answer is “yes” and this time limit is known as a “Statute of Limitations.” Traditionally, the IRS Statute of Limitations has been three years to complete an audit of your income tax returns. The IRS Statue of Limitations is extended to six years for criminal violations or the omission of more than 25% of your income.
However, the IRS audit Statute of Limitations time frame begins with the filing of a tax return, and is not simply based upon a date. Therefore, if you have not filed a tax return, the Statute of Limitations cannot begin. In other words, there is no Statute of Limitations on the IRS when a taxpayer fails to file tax forms or tax returns, or when they file fraudulent returns. The omission of offshore disclosure or reporting of offshore accounts, assets and income on the IRS FBAR would fall outside of these statutes unless and until the taxpayer reported their existence to the IRS.
The IRS Statute of Limitations on the collection of taxes is generally 10 years from the date the taxes were assessed. The IRS has 10 years to attempt to collect unpaid tax debt before they must abandon their debt collection efforts.
Why is it important to understand the concepts of the IRS audit Statute of Limitations? These dates actually provide leverage for a US taxpayer. For example, when an audit is approaching the 3 year Statute of Limitations, the IRS will often ask the taxpayer to sign a voluntary extension. Most taxpayers will sign this in an effort to stay in the IRS’ good graces. However, it may simply not be in your best interests to do so.
The experienced IRS tax attorneys at Allen Barron have extensive experience and expertise dealing with the IRS and their tactics. In many cases it is not in the taxpayer’s best interest to give the IRS an extension. This can force the IRS to bring your audit to a close, and this strategy may be the best way to stop a “fishing expedition” or other efforts to expand the scope of the audit. In other cases, we may need to expand the “record” associated with the audit to increase the likelihood of success when appealing the outcome of an audit.
The IRS Statutes of Limitations were established to limit the ability of the agency to harass or permanently destroy the lives of US taxpayers. A US taxpayer should never face the IRS without expert representation.