Statute of Limitations (Tax)
The IRS generally has 3 years from the filing date to assess additional tax. This extends to 6 years if more than 25% of gross income is omitted. There is no statute of limitations for fraud or failure to file a return.
Exam Tip
3-year general rule. 6 years if >25% income omitted. No limit for fraud or non-filing. Refund: later of 3 years from filing or 2 years from payment.
Tax Statute of Limitations
The statute of limitations limits the time the IRS has to assess tax or the taxpayer has to claim a refund.
Assessment Periods
| Situation | Time Limit |
|---|---|
| General rule | 3 years from filing (or due date, if later) |
| >25% gross income omitted | 6 years |
| Fraud | No limit |
| Failure to file | No limit |
| False return | No limit |
Refund Claim Periods
| Rule | Time Limit |
|---|---|
| General | Later of 3 years from filing or 2 years from payment |
| If filed within 3 years | Refund limited to tax paid within 3 years + extensions |
| If NOT filed within 3 years | Refund limited to tax paid within 2 years |
| Bad debts/worthless securities | 7 years |
When the Clock Starts
The statute runs from the later of: (1) the actual filing date, or (2) the original due date. Early-filed returns are treated as filed on the due date.
Exam Alert
3 years = general. 6 years = >25% gross income omission. Unlimited = fraud or no return filed. Refund claims: later of 3 years from filing or 2 years from payment. Early returns treated as filed on due date.
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Tax Fraud
Tax fraud is the willful attempt to evade or defeat tax. Civil fraud carries a 75% penalty on the underpayment. Criminal tax evasion can result in fines up to $250,000 and/or 5 years imprisonment. There is no statute of limitations for fraud.
Penalty Abatement
Penalty abatement is the removal or reduction of IRS penalties due to reasonable cause or first-time penalty abatement (FTA) relief for taxpayers with a clean compliance history.
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