Irs Statute of Limitations - Do Taxes Ever Expire?
Many Americans believe that an Irs debt is a debt for life and that the tax assembler can hound them to the grave. Thankfully, that is not the case and there are statutory time limits on the potential of the Irs to eye and secure taxes. Taxes do expire at some point and in some cases Irs does not get the money they were legally entitled to collect.
Irs Statute of Limitations - Do Taxes Ever Expire?
Basically, Irs has 10 years from the date they send out their first bill to secure the tax. The 10 year rule does not apply to the states. Some, like California have no statute of limitations and the state tax assembler can easily hound you forever. The federal tax assembler must get the cash before the clock runs out.
For tax assessments made after November 5, 1990, the Irs cannot secure the tax after 10 years from the date of the former appraisal absent special circumstances. special circumstances that may extend the statute are: a bankruptcy not completed or wherein the tax is not discharged; filing an Offer-in-Compromise; or signing a Form 900 Waiver allowing the United States further time to secure the tax. Also, it is inherent for the government to sue to sacrifice the tax claim to judgment before the 10 years expires.
If you never file a tax return, there is no statute of limitations on Irs requiring you to file, but as a matter of policy, Irs commonly only requires non-filers to file the last 6-7 years. If Irs files for you by doing a Substitute-for-Return (Sfr), they have 10 years from the date they file the Sfr to secure from you. If a Federal Tax Lien is on file against you, it expires and becomes void if the basic statute expires.
You can find out when the statute expires on your tax bill by requesting a report of Accounts (Roa) from Irs for each tax year you owe. If you can't afford to pay the tax, your inventory might be eligible to be put in a "temporary hardship" status. It may be inherent to "ride out" the statute in hardship if you qualify. An impending statute might also be a useful factor in an Offer-in-Compromise.
If you have a repayment advent to you, you only have 3 years from the due date to secure your refund. If you file 3 or more years after the due date, the repayment is lost. In some cases you can eye a repayment beyond the three years. If you full pay the tax, you can file a claim for repayment within 2 years of the payment. If your claim relates to a bad debt or worthless security, you have 7 years to make a claim.
The flipside to the 3 year repayment rule is that Irs only has 3 years to eye a filed return by audit in most cases. Now, the tax code is complicated and there are exceptions to these rules. If you have committed fraud or tax evasion, there is no statute for audit. There is also a 6 year rule for audit in cases of "substantial omission" of 25% or more in income. But for most folks, the three year statute will apply on audits.
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