What Is the Statute of Limitations on Income Taxes?

by Madison Garcia ; Updated July 27, 2017
A businessman is working on a financial analysis.

Just like any other debt, there is a statute of limitations for income tax collection. As a rule of thumb, the Internal Revenue Service has a 10 year statute of limitations when it comes to collecting income taxes. However, that can be extended in certain circumstances or disregarded completely if the taxpayer committed fraud.

IRS Has a Decade

The Internal Revenue Code allows the IRS a 10 year statute of limitations to collect taxes. This clock begins at the time of tax assessment, which is when an IRS representative certifies the amount a taxpayer owes. The IRS has a variety of tools at its disposal to collect during the statue of limitations. After contacting the taxpayer, the IRS can institute wage garnishments, levies and liens, and can pursue legal action to collect what it's owed.

Audit Timeframe

If the IRS suspects that you're not reporting all of your taxable income, it has the ability to audit your tax return. The IRS has three years to audit your tax returns after you file. However, if the IRS discovered that you omitted 25 percent of your income on any of those returns, the statue of limitations for audit increases. At that point, the IRS can audit the last six years rather than three.

Collection Extensions

The statute of limitations doesn't necessarily end exactly 10 years after the tax assessment. The IRS can put the countdown on hold if there is a period it no longer has access to you -- for example, if you leave the United States or become a fugitive. Also, the IRS may not start the clock for all tax issues at the same time. For example, if it discovers a new amount of income that was not reported, the statute of limitations will begin the day that it assesses those taxes. The 10-year collection period can also restart if you take certain actions for a given tax year such as making an offer in comprise, although filing an amended return does not usually extend the limitation period.

Fraud Considerations

The statue of limitations for IRS collections assumes that you failed to report income because of an honest mistake. If the IRS believes you committed fraud, all bets are off. The IRS can assess taxes at any time if you filed a fraudulent return or purposefully attempted to evade income tax. If you committed fraud, you'll face higher penalties and interest fees compared to other delinquent taxpayers. You'll also face legal fees, fines and possibly jail time if the IRS chooses to prosecute you.

About the Author

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

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