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  • Robert Nath

Statute of Limitations

Updated: Mar 14, 2022

What is the “statute of limitations” on collecting taxes?

Normally, it’s ten years from date of assessment. “Assessment” generally means the date the IRS sends you a bill for the taxes due. Many people believe there is no limit on the IRS’ authority to collect. Others will answer, “three years,” or “five years,” or “seven years.” The answer is “ten years” – at least, that is where it starts (it can be extended)/ That time starts running when the IRS “assesses” the tax, that is, when it officially records your tax liability on its computers and sends you a bill. When you file your tax return, you are “assessed.” In most cases, you have paid in full already through withholding, or you send in more money with the return. So it’s not an issue, normally. But if you have a “balance due” return, the IRS will assess the tax, and penalties, and interest. It then gets ten years to collect.

What is the “three year” period of limitations?

The IRS has three years to examine your tax return and proposed (“assess”) more taxes. Assessing a tax means billing you for it and demanding payment. You can extend this period in a number of ways. The IRS can also extend it under certain circumstances.

How is the collection period of limitations extended?

You can extend it, or the IRS can extend it. You extend it by these means (the most common): a voluntary waiver (usually, Form 900), filing an offer in compromise, requesting an installment agreement, collection due process hearing request, innocent spouse request, application for taxpayer assistance order, petition in bankruptcy or other proceeding where your assets come under court control, and going outside the US for 6 months. The IRS can extend the statute by requesting the Department of Justice to file suit against you to obtain a judgment for the taxes (the statute is suspended when a timely suit is filed).

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