When a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.
Bob recently received a copy of his account transcripts from the IRS. Upon reviewing the paperwork, he noticed that the government agency made note of a “date of assessment,” which prompted him to wonder how the date of assessment was determined? Moreover, he wanted to know what role one’s date of assessment plays with regard to the time frame the government has to collect back taxes.
If you ever find yourself in a situation similar to Bob’s, with questions about your tax history, in addition to speaking with your tax advisor, you can request that a copy of your tax return transcript and tax account transcript be mailed to you. Fill out the online form here, but make sure you are making the request for the current tax year’s transcript or transcripts for three years prior.
If you are requesting transcripts for older tax years or you need a wage and income transcript or verification of non-filing letter, you’ll need to complete Form 4506-T and send it to the address listed on the form’s instructions. Due to a recent security breach, your transcripts will not be sent electronically.
How Far Back Can The IRS Go To Collect Back Taxes?
If the IRS is attempting to collect past due taxes, the agency will assign a date of assessment to your IRS account transcript.
Read Also: IRS Says You Owe More? Don’t Write That Check Yet!
Like many of the invoices you see every day, every item on your transcript will be assigned a code. Your date of assessment is no different. To identify the date of assessment on your account transcript for the tax year in question, look for Transaction Code “150.” Tip: If you are wondering what the other codes on your transcript mean, you can find a comprehensive list here.
As a general rule, the IRS must assess tax, or file suit against the taxpayer to collect the back taxes, within three years after the original tax return was filed. This three-year period of limitation on assessments also applies to penalties. In fact, this rule continues to apply regardless of whether the return was filed on time or not. In general, the statute of limitations will almost always begin the day after the taxpayer files their income tax return.
The Rules May Not Apply
It seems as though there are always exceptions to the rules we work so hard to uphold – taxes are not excluded from this trend. For instance, when a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.
While the statute of limitations for assessment is three years after your return has been filed, the IRS still has 10 years to actually collect the assessed tax. Below is an example of the assessment process in action:
- April 15, 2015 – you filed your 2014 tax return with the IRS
- March 31, 2018 – the IRS assesses additional taxes on your 2014 tax return
- The IRS has until March 31, 2028, to collect the additional tax or file suit against you.
While this information may help to shine some light on IRS assessments and statute of limitations rules, every situation is unique and hinges on several specific variables. Your tax advisor can help you sort through codes and details to get you back on the right track. Email Rea & Associates to learn more.
By Christopher Axene, CPA (Dublin office)
Check out these articles to learn more about your responsibilities as a taxpayer:
How Far Back Can The IRS Go For Tax Auditing?
The Truth About Tax Extensions
If Something Happens To me, What Will Happen With My Financial Matters?