Key Takeaways
- Assessment (General): 3 years from filing (or due date if later).
- Assessment (Substantial Omission > 25%): 6 years.
- Assessment (Fraud/No Return): Indefinite (No limit).
- Refund: Later of 3 years from filing or 2 years from payment.
- Collection: 10 years from assessment (CSED).
- Statute can be extended by agreement (Form 872) or tolled by certain events.
Statutes of Limitations: Time Limits on IRS Action
Why This Matters for the Exam
Statutes of limitations are among the most tested topics on Part 3. The IRS has limited time to assess tax, collect tax, and process refund claims. Understanding these limits is critical for protecting clients and advising on tax planning.
Expect at least 4-6 questions on assessment, collection, and refund statutes.
Overview of the Three Statutes
| Statute | Purpose | General Rule | Exceptions |
|---|---|---|---|
| Assessment (ASED) | IRS must assess additional tax | 3 years from filing | 6 years (substantial omission), Unlimited (fraud/no return) |
| Collection (CSED) | IRS must collect assessed tax | 10 years from assessment | Tolled during OIC, CDP, bankruptcy |
| Refund (RSED) | Taxpayer must claim refund | Later of 3 years from filing or 2 years from payment | Limited to amount within lookback period |
Assessment Statute of Limitations (ASED)
The Assessment Statute Expiration Date (ASED) is the deadline for the IRS to assess additional tax.
General Rule: 3 Years
The IRS has 3 years from the later of:
- The date the return was filed, or
- The date the return was due (including extensions).
Example:
- 2024 return due April 15, 2025.
- Filed on March 1, 2025.
- ASED: April 15, 2028 (3 years from due date, since due date is later).
Extended Statute: 6 Years (Substantial Omission)
If the taxpayer omits more than 25% of gross income, the statute extends to 6 years.
Calculation:
- Gross income reported: $100,000
- Gross income omitted: $30,000 (30% > 25%)
- Statute: 6 years instead of 3.
Note: The 25% test applies to gross income, not taxable income.
No Statute: Fraud or No Return
There is no statute of limitations if:
- The taxpayer files a false or fraudulent return with intent to evade tax.
- The taxpayer fails to file a return.
In these cases, the IRS can assess tax at any time.
Extending the ASED by Agreement
The IRS and taxpayer can agree to extend the assessment period using Form 872 (Consent to Extend) or Form 872-A (Special Consent).
- Form 872: Extends to a specific date.
- Form 872-A: Open-ended extension (terminated by either party with 90 days' notice).
Collection Statute of Limitations (CSED)
The Collection Statute Expiration Date (CSED) is the deadline for the IRS to collect assessed tax.
General Rule: 10 Years
The IRS has 10 years from the date of assessment to collect the tax.
Example:
- Tax assessed on June 1, 2024.
- CSED: June 1, 2034.
After the CSED, the debt expires, and the IRS cannot collect.
Tolling the CSED
Certain events pause (toll) the 10-year clock:
| Event | Impact on CSED |
|---|---|
| Offer in Compromise (OIC) pending | Tolled while OIC is pending + 30 days |
| CDP Hearing pending | Tolled while CDP is pending |
| Bankruptcy | Tolled during bankruptcy + 6 months |
| Collection suspended by court order | Tolled during suspension |
| Taxpayer outside U.S. | Tolled if absent for continuous 6+ months |
Refund Statute of Limitations (RSED)
The Refund Statute Expiration Date (RSED) is the deadline for taxpayers to claim a refund.
General Rule: Later of 3 Years or 2 Years
The taxpayer must file a refund claim by the later of:
- 3 years from the date the return was filed, or
- 2 years from the date the tax was paid.
Example 1: Timely Filed Return
- 2024 return filed April 15, 2025.
- Tax fully paid at filing.
- RSED: April 15, 2028 (3 years from filing).
Example 2: Late Payment
- 2024 return filed April 15, 2025 (no tax paid).
- Tax paid August 1, 2026.
- RSED: Later of April 15, 2028 (3 years from filing) or August 1, 2028 (2 years from payment) = August 1, 2028.
Lookback Limitation
Even if the refund claim is timely, the refund amount is limited to payments made within the lookback period:
- If filed within 3 years: Refund limited to tax paid within 3 years + extension period.
- If filed within 2 years (but not 3): Refund limited to tax paid within 2 years.
Master Statute Summary Table
| Statute | Period | Measured From | Extended By |
|---|---|---|---|
| Assessment (ASED) | 3 years | Later of due date or filing date | Form 872/872-A; 6 years if >25% omission; Unlimited if fraud/no return |
| Collection (CSED) | 10 years | Date of assessment | Tolling events (OIC, CDP, bankruptcy) |
| Refund (RSED) | Later of 3 years or 2 years | Filing date / payment date | Limited lookback period |
Real-World Scenario
Scenario: A taxpayer filed their 2020 return on April 15, 2021. It is now March 2025. The IRS proposes an adjustment that would increase tax by $10,000.
- Question: Can the IRS assess the additional tax?
- Answer: Yes. The 3-year ASED runs until April 15, 2024. Wait—it's March 2025. The statute has expired unless:
- There's a substantial omission (>25% gross income) → 6 years (until April 15, 2027).
- There's fraud or no return → no limit.
- The taxpayer signed Form 872 to extend.
On the Exam
Expect 4-6 questions on statutes, typically:
- Assessment Questions: "What is the general assessment period?"
- Omission Questions: "If a taxpayer omits 30% of gross income, what is the assessment period?"
- Collection Questions: "How long does the IRS have to collect after assessment?"
- Refund Questions: "By when must a refund claim be filed?"
- No Return Questions: "Is there a statute if no return is filed?"
The key is to remember: Assessment: 3/6/Unlimited. Collection: 10 years. Refund: Later of 3 years or 2 years.
What is the statute of limitations for assessment if a taxpayer omits 30% of their gross income?
If a taxpayer never files a return, when does the assessment statute expire?
How long does the IRS have to collect tax after assessment?