Tolling Tax Statutes of Limitations: Collections, Refund Claims, IRS Audits, and the Right to Finality

Description

There are many tax statutes of limitations, and although many work against the taxpayer, many can work in the taxpayer's favor. Included as No. Six in the Taxpayer's Bill of Rights is the Right to Finality. As explained by the IRS, "Taxpayers have the right to know the maximum amount of time they have to challenge the IRS's position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit."

A taxpayer's delinquent tax bill could be canceled if the 10-year statute on collections passes without the IRS collecting the balance due. Most are aware that the IRS generally has three years from the date a taxpayer files his return (or original due date) to assess the additional tax due. More confusing is the refund claim statute, which says you must file a claim within three years of the filing date or two years from the date you paid tax (whichever is later) to receive a refund.

Filing false or fraudulent tax returns can extend relative statutes. Tax practitioners must understand the maximum amount of time the IRS has to assess and collect tax and the maximum amount of time taxpayers have to challenge an IRS position, as well as what extends these critical deadlines.

Listen as our panel of tax professionals outlines what tax preparers need to know about taxpayers' rights to finality and the many tax statutes of limitations.