Statutes of Limitation
How Much Time Does the IRS Have to Act?
Time to Assess Taxes - ASED
When the Assessment Statute Expiration Date (ASED) passes, the IRS cannot assess more taxes. The ASED is three years from the due date of your return, plus possible extra time. The due date of your individual tax return is mid April. If you filed for an extension, the due date is mid October. What if you filed your return after the due date? Then the normal ASED is three years after the date the IRS received your return.
There are several circumstances that delay the arrival of the ASED. Here are the most common examples:
No time limit for the IRS to asses. First, if you don’t file your return at all, the three years never start running. The same applies to false or fraudulent returns filed with the intent to evade tax. In both cases the IRS has indefinite time to asses taxes against you.
Omitting more than 25% of your gross income from the return adds another three years. So, the IRS has six years to assess tax, rather than three.
The IRS may ask you to voluntarily agree to extend the time they have to assess tax. We strongly recommend to consult with a tax professional before agreeing.
If you submit an amended return within 60 days of the ASED, then the ASED is extended by 60 days.
If you are outside the US for more than 6 continuous months, the assessment period is suspended. It will resume after your return. To avoid this issue, visit the US more often than every half year.
The ASED is also suspended for at least 90 days if the IRS sends you a Notice of Deficiency. The IRS can asses until your protections run out. Some more extensions apply if you then petition the Tax Court or file for bankruptcy.
You can find some of the relevant laws under IRC §6501 (ASED), and IRC §6503 (ASED suspension).
Time to Get a Refund - RSED
How long do you have to claim a refund? This is what the Refund Statute of Expiration date (RSED) tells you. The RSED is three years after your return was due, or two years after you paid your tax – whichever is later. After that date you cannot get a refund any more.
There are a few exceptions, though, in which you can get your refund later. The most common are:
You agreed with the IRS to extend the time to collect form you (the ASED). Then, you also have more time to claim a refund.
You were affected by a Presidentially declared disaster. You have one more year to claim a refund.
You served in a combat zone. You may qualify for an extension to claim your refund.
You claim a bad debt deduction or worthless securities. Then, you have seven years to claim a refund.
You can find some of the relevant laws under IRC §6511.
Time to Collect Taxes - CSED
There are two outcomes you can expect from assessed taxes. They are either paid, or they expire. At the time of assessment a 10 year clock starts ticking. Your tax expires once the clock runs out at the Collection Statute Expiration Date (CSED). But the collection time can pause (suspension of the CSED) or lengthen (extension of the CSED).
Usually, when you are protected from collections the CSED is suspended. Common examples are:
An Installment Agreement is under review
An Offer in Compromise is under review
An Appeal is filed and under consideration (CDP Hearing)
A Bankruptcy is in progress
You live outside of the US continuously for more than six months
Innocent Spouse Relief is under consideration
In some cases the CSED extends without protection against collections. For example:
6 months extension: filed for Bankruptcy
6 months extension: return to the US after more than 6 continuous months outside of US
30 days extension: Installment Agreement withdrawn or rejected
60 days extension: Innocent Spouse Relief requested
§6652 Collection after Assessment
§6331 (k) OIC and IA pending
§6503 Suspension of running period of limitation
Bankruptcy
Some statutes apply to Bankruptcy.