Statute of Limitations on Federal Tax

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Contrary to popular belief, a statute of limitations exists on federal taxes. The amount of time mandated on the statute varies.

Assessment

According to IRS Code 301.6501(a)-1(a), the Internal Revenue Service (IRS) is required to assess any tax return within three years of filing. No penalties can be added or audit performed after that time. The time period increase to six years if an individual omits at least 25 percent of his gross income from the original return.

Exception

For individuals who file a fraudulent return or fail to file altogether, there is no limitation for the IRS to assess penalties.

Collection

For assessments after November 5, 1990, the statute of limitations on collection is 10 years from the date of assessment.

Tax Liens

When a federal lien is placed on a taxpayer for collection, the statute of limitations is 10 years from the lien date, provided the lien is not renewed during that time. After 10 years, the lien releases automatically.

Refunds

Refunds for tax overpayments expire three years from the original filing date or two years from the date the tax was paid, whichever is later. If no return was filed, the refund expires two years from the date the tax was paid.