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Key Takeaway

Don't think the statute of limitations offers protection if you haven't filed taxes in a timely manner, because the 10-year clock does not begin ticking until you file taxes. If you are owed a refund and do not file, you forfeit your refund if you do not file within the three year timeframe.

Fact Sheet: IRS – Statute of Limitations

Statue of Limitations on IRS Tax Assessment

The IRS has three years from the date a taxpayer's return is filed to assess the tax. Typically when a return is filed, the assessment occurs within a month. However, an additional assessment can be made if a return is later audited – which could be within several years of filing. Overall, there is typically an open audit timeframe of three years and the IRS will not go back further unless they discover a serious error. Note: The statute of limitations does not apply in cases of falsified or fraudulent returns.

Statute of Limitations on Claiming Refunds

The three year statute timeframe also applies to taxpayer refunds owed. For example, let's assume you neglected to file your 2010 income tax until a month ago. After filing, you were entitled to a substantial refund. Unfortunately, you will not receive the refund, nor will it be applied to any balances owed the IRS. To get your refund, you would've had to file your 2010 return by April 15, 2014.

Statute Of Limitations on IRS Collections.

Regarding the statute of limitations on iRS collections, the agency has 10 years from the date of assessment to collect tax liabilities generated by a tax return. So if you filed your 2014 return in a timely manner (April 15, 2015), the statute of limitations on collections will expire in 2025. However, if you file your 2014 return in 2017, the IRS can take collection actions until 2027.

Statute of Limitations – Payroll Taxes-Civil Penalty

There is a 10-year statute of limitations for civil penalties assessed on payroll taxes. Failure to pay payroll withholding and tax liabilities is a serious violation and can result in a penalty of 100% so be very careful to make payroll taxes disbursements as required.

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