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The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law

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How Long Can the IRS Come After Me?

Posted on in Internal Revenue Service

clock, statute of limitations, Chicago Tax AttorneysIt recently came to your attention that you made a mistake on the tax return you filed a couple of years ago.  Do you still need to worry about it?  And if so, for how much longer?  What if you discovered this tax controversy because the IRS sent you a letter pointing out your mistake and telling you that you now owe them more money then you believed at the time?

Without the Letter

If the IRS hasn't alerted you to a problem with your taxes, they must "assess" any additional tax within 3 years from either the due date of the return or the date the return was actually filed (if filed late). There are two exceptions:

  • If the error involves an omission of 25% or more of the gross income reported on the return, they get 3 additional years.
  • If the IRS can prove that you filed a false tax return, a fraudulent tax return, or failed to file any return at all.  In such cases, the statute of limitations goes out the window and they can come after you at any time (i.e., no statute of limitations period on making an additional assessment).

With the Letter

If you've received a letter from the IRS telling you that you owe more taxes for a particular year, this generally means you have already been assessed , so you are now dealing with the "collection" statute of limitations.  

The basic rule for IRS collections is that they have 10 years (from the date of the assessment to collect both the taxes owed and any penalties or interest that have accrued on that debt.  If you run that clock out, the IRS can no longer take enforced collection activities against you (levy, lien filings, property seizures). But, naturally, there are significant exceptions:

Suspending the 10-Year Clock

There are a few circumstances in which time passing is simply not counted against the collection statute expiration clock:

  • If the IRS is legally barred from collecting against you (for example, if a bankruptcy court issues a "stay" against them for tax debts of a petitioner), the 10-year countdown is suspended for the duration of the proceeding, plus six months.
  • If you file an Offer in Compromise, or a Collection Due Process Hearing in which you propose some other collection "alternative" the clock is similarly stopped during the period of time that the IRS ponders your offer  or other proposal- whether they accept it or not.
  • If you live outside of the United States for more than six continuous months, that time doesn't count toward the 10-year countdown.

Extending the 10-Year Clock

There are two circumstances in which the 10-year clock can be extended. The first is if the IRS sues you in court and obtains an extension. It's not often that the IRS bothers to initiate a suit like that, but when they do, they win most of those cases. The second way is if you agree to extend the clock, almost always because you've agreed to a payment installment agreement that would stretch beyond the 10 year limit. However, even this voluntary extensions can't add more than six additional years to the clock. If you are being pursued (or are concerned about being pursued) by the IRS or Illinois Department of Revenue, it is in your best interests to speak with a tax professional as soon as possible. At the Chicago-Kent Tax Clinic, we provide free consultations and affordable representation for those with federal or state tax problems. To speak with one of our skilled and experienced Chicago tax attorneys, contact our office today at 312-906-5041.

Sources:

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Audit-FAQs

https://www.irs.gov/irm/part5/irm_05-001-019.html

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