The IRS has three years to assess a tax. However, once a tax is assessed it has 10 years to collect. The statute of limitations is suspended during certain periods, such as bankruptcy or filing a Tax Court petition.
If a return omits a substantial amount of gross income, the statute of limitations is extended to six years. “Substantial” is defined as an amount exceeding 25% of reported gross income.
There is no statute of limitations where a taxpayer does not file a return or if a false or fraudulent return is filed with the intent to evade tax.
The IRS has 10 years to collect an assessed tax. However, it can file a lawsuit near the end of the 10 year period and extend the collection period for another 10 or 20 years. This is not commonly done.
There are myriad additional rules, exceptions and limitations that apply to time limitations. A tax attorney needs to very carefully review your tax transcripts and other tax documents to determine exactly when the time runs out.
If the statute of limitations is almost ready to run out, you should strategize with a tax attorney to determine the best course of action.
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