Limitations Periods on Collections

• Although the IRS must assess taxes against taxpayers within three years, it has a longer period of time to collect past-due income taxes. The IRS has the legal right to collect federal income taxes from taxpayers from the date those liabilities accrued. However, the IRS has more than 10 years to collect taxes from taxpayers who file fraudulent returns or neglected to file tax returns. The IRS has an unlimited statute of limitations period to collect taxes from these taxpayers. Thus, although the IRS must assess taxes within three years, it can collect taxes after an assessment for an unlimited time from individuals who failed to file tax returns or used fraudulent information on their tax returns in an attempt to evade their tax liabilities.
  
  

Exceptions

• The IRS has six years to assess taxes against taxpayers who erroneously reported their taxes by omitting more than 25 percent of their gross income. The IRS has a right to an abatement of its limitations period in certain circumstances. For instance, the federal government's statute of limitations stops while the IRS is considering an installment agreement or a settlement offer commonly known as an offer in compromise.
  
  

Abatement Rules

• Additionally, the IRS has a right to an abatement of its statute of limitations "clock" when a taxpayer requests a hearing and receives a "Notice of Determination." When taxpayers file for bankruptcy, the IRS statute of limitations deadlines are stayed during bankruptcy proceedings plus an additional six months after bankruptcies are lifted.
  
  The IRS also provides taxpayers with three years to claim tax refunds for any given year. The three-month period begins from the date taxes were originally due or three years from the six-month extension deadline, if requested.
  
  

Considerations

• Since tax laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.