The IRS is bound by statutes of limitations for collecting back taxes and conducting audits. Back taxes that exceed 10 years from the date of assessment cannot be collected legally. Similarly, a tax return may not be audited later than three years from the date it was due or filed, whichever is later. However, exceptions exist in both cases, so it is important that you know and understand the laws regarding IRS statutes of limitations before you pursue this route of tax relief.
Expiration of Assessment
Every tax assessment has a collection expiration assessment date, or CESD. The CESD is 10 years from the date of assessment for all taxes, penalties and interest on a given tax liability. The taxpayer does not owe the IRS anything after 10 years have passed. However, there are exceptions to the statute of limitations. If any of the following exceptions are true, the IRS will have more than 10 years to collect a taxpayer’s taxes, penalties and interest.
If the taxpayer agrees in writing to allow the IRS more time to by signing a waiver
If the taxpayer files bankruptcy during the 10-year period
If the taxpayer files an offer in compromise during the 10-year period
If the taxpayer files ‘an application for taxpayer assistance order’ during the 10-year period
If the taxpayer files a ‘request for a collection due process appeal’ during the 10-year period
There are other situations that may extend or suspend a CESD. Some of these include: the taxpayer lives outside of the United States; the taxpayer is serving in a combat operation or contingency operation, or in innocent spouse situations.
The IRS can audit a return up to three years from the date it was due or filed, whichever is later. For example, if you file your 2004 return on April 15, 2009, the IRS has until April 15, 2012, to audit that return. If the IRS finds a substantial error on the audited return, additional years’ returns up to six years back can be added. The IRS may ask you to extend the statute of limitations for an older year or when an audit in process has not been resolved and the statute of limitations date is close. You do not have to agree to an extension however, the examiner will try to convince you it’s in your best interest to sign the extension.
Because the laws regarding statutes of limitations for collections and audits are so complex and the IRS does not want your tax liability to disappear, your chances of this form of tax relief depend on the aid of tax resolution specialists who have successfully waited out the IRS on a taxpayer’s behalf. The professionals at Tidy Tax are here to help you determine your CESD, if you qualify, and your best course of action. We are on your side.
IRS Appeals Division
The goal of the IRS Appeals division is to settle disputes between the IRS and taxpayers. However, representing yourself before the Appeals division of the IRS is not advised. It is similar to going to court without a lawyer. If you don’t know the law, your outcome will not be favorable. Therefore, it is imperative that a taxpayer know the laws regarding action and the appeal process before commencing. When appealing an IRS decision, you need expert representation on your side to fight for your rights. Let the professionals at Tidy Tax help you win your appeal. Contact us today. 866.749.7717