Evergreen Tax Law

How Long Does The IRS Have to Collect?

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     Many people have some notion that after a certain point the IRS can no longer try to collect from you. This is only partially true, and depends entirely on whether you have filed your taxes or not.

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The Statute of Limitations on Assessment

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     Once you file your return, the IRS generally has 3 years, from the due date of the return or the date the return was filed, whichever is later, to examine the return and determine if it is correct or if you owe more taxes or deserve a refund. This determination by the IRS is what is known as “Assessment.”

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     However, in cases where the gross income listed on the return is off by more than 25%, the IRS will have 6 years from the due date of the return or the date the return was filed, whichever is later, to assess the taxes.

Again, the above only applies to assessing (determining) the amount of taxes owed. It has nothing to do with the time limit the IRS has to collect the taxes.

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Substitute Returns

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     Until the IRS has assessed the amount of taxes you owe, there is no limit to how long they have to collect from you. When you file your taxes, the IRS assesses them soon after. When you do not file your taxes the IRS sometimes assesses your taxes and files a return for you (known as a Substitute Return).

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• When the IRS files a Substitute Return for you, the amount owed is almost always higher than it would be otherwise, because the IRS often does not give you credit for deductions and exemptions you may be entitled to receive.

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The Statute of Limitations for Collection

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     After the IRS has assessed the amount of taxes you owe, the IRS will generally have 10 years to collect those taxes. During these 10 years, the IRS will seek to collect all the taxes you owe through various means, such as a lien or levy.

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Again, if neither you nor the IRS file a return on your behalf, there is no time limit on the ability of the IRS to collect.

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There is No Statute of Limitations on False or Fraudulent Returns

 

     In cases where someone willfully or intentionally files a false or fraudulent tax return, or willfully or intentionally avoids filing their tax returns, the IRS has no time limit on pursuing the missing taxes.

Furthermore, intentional filing of fraudulent tax returns and/or evasion of taxes are federal crimes for which one may face severe fines and even jail time.

 

     However, even where there has been criminal activity, it is possible to negotiate with the IRS to avoid the most severe penalties. An experienced tax professional can help you work out a deal with the IRS, in which you will fully cooperate with them in order to establish a method of repaying the taxes you owe and avoid any criminal charges.