The IRS and Department of Justice have cracked down on tax fraud and tax evasion regardless of its form. However, in recent announcements the Department of Justice has revealed its targeted enforcement focus on business payroll tax fraud, offshore tax fraud including non-compliance with FATCA & FBAR, Stolen Identity Tax Return Fraud (SIRF), and other forms of tax fraud. Beyond the enforcement focus, Acting Assistant Attorney General Caroline Ciraolo revealed that the Department of Justice’s Tax Division averages around 6,000 active matters. These cases are worked by approximately 340 attorneys, who are successful in more than 95 percent of the cases they prosecute.
In light of such odds, many taxpayers may hope that time alone will cure their tax problems. However betting on the statute of limitations is a risky proposition complicated by the fact that the actions you take can extend the time for charges to be brought by years. However knowing approximately how long you may be required to prove the source of income or the propriety of deductions can bring some peace of mind. However, no action can substitute for a conservative and meticulous handling of all your tax filing, payment, and disclosure obligations by a tax professional.
How Long Does the IRS Typically Have to Bring a Tax Audit?
The basic rule for the IRS’ ability to look back into the past and conduct a tax audit is that the agency has three years from your filing date to audit your tax filing for that year. However, taxpayers who fail to include all sources of their income may face a longer time period. That is, taxpayers who omit greater than 25 percent of their total income are subject to a six year lookback window. However, the foregoing is contingent on the taxpayer not voluntarily agreeing to an extension of time for the IRS to audit. The IRS may, and often does, request additional time to complete its audit. Because every tax situation is unique, if you find yourself the recipient of such a request it is wise to seek the advice of an experienced tax attorney.
Can Allegations of Serious Wrongdoing Affect the Time the IRS has to Investigate?
Unfortunately for taxpayers accused of engaging in tax fraud the time limit for how long the IRS has to assess additional taxes and penalties is unlimited – though it becomes increasingly less likely for the IRS to open as a civil tax audit as the allegedly wrongful acts become more remote in time. Under Section 6531(2) of the U.S. Tax Code, the IRS has six years from the time the tax return is filed or from the last willful act that prevented the filing of a tax return from bringing a criminal tax charges. However, it can be difficult to pinpoint when, exactly, the last willful act occurred. Furthermore, in criminal tax matters the statute of limitations will be tolled by one’s status as a fugitive or if the accused is outside of the United States.
The time the IRS has to assess a tax liability should not be confused with the time it has to collect a tax liability. Generally speaking the IRS has 10 years from the date of assessment to collect the liability. That 10 year period is subject to numerous circ*mstances which will cause the extension of the 10 year period including offers in compromise, requests for collection due process hearings, bankruptcy, and absence from the United States. In addition, if the IRS files suit to reduce the tax lien to judgment it can extend the time it has to collect. Indeed the IRS takes the position in the Internal Revenue Manual that it may collect against the taxpayer’s real or personal property indefinitely!
The Brager Tax Law Group is dedicated to providing strategic tax advice for serious tax problems. To schedule a tax consultation with one of our tax professionals call 800-380-TAX-LITIGATOR today or contact us online.
FAQs
Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.
Can the IRS go back more than 10 years? ›
In some cases, the IRS can take more than 10 years to collect tax debts. This happens when an event causes the clock to stop ticking on the statute of limitations and the deadline gets extended. This is called tolling the statute of limitations.
Can the IRS come after you after 10 years? ›
The IRS generally has 10 years from the assessment date to collect unpaid taxes. The IRS can't extend this 10-year period unless the taxpayer agrees to extend the period as part of an installment agreement to pay tax debt or a court judgment allows the IRS to collect unpaid tax after the 10-year period.
How far back can you get IRS records? ›
Prior year tax returns are available from the IRS for a fee. Taxpayers can request a copy of a tax return by completing and mailing Form 4506 to the IRS address listed on the form. There's a $43 fee for each copy and these are available for the current tax year and up to seven years prior.
What is the IRS 6 year rule? ›
6 years - If you don't report income that you should have reported, and it's more than 25% of the gross income shown on the return, or it's attributable to foreign financial assets and is more than $5,000, the time to assess tax is 6 years from the date you filed the return.
How far back can tax evasion be investigated? ›
The basic rule for the IRS' ability to look back into the past and conduct a tax audit is that the agency has three years from your filing date to audit your tax filing for that year.
Does the IRS destroy tax records after 7 years? ›
Individual tax returns (the Form 1040 series) are temporary records which are eligible to be destroyed six (6) years after the end of the processing year, unless extended due to an Open Balance Due - Collection Statute Expiration Date.
How far back is the IRS allowed to go? ›
Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.
Can IRS collect taxes from 20 years ago? ›
The IRS generally has 10 years – from the date your tax was assessed – to collect the tax and any associated penalties and interest from you. This time period is called the Collection Statute Expiration Date (CSED). Your account can include multiple tax assessments, each with their own CSED.
Does the IRS ever forgive debt? ›
The IRS offers a tax debt forgiveness program for taxpayers who meet their qualification requirements. To be eligible in 2024, you must claim extreme financial hardship and have filed all previous tax returns. The program is available only to those who qualify.
The Collection Statute Expiration Date (CSED) marks the end of the collection period, the time period established by law for the IRS to collect taxes. The CSED is normally ten years from the date of the assessment.
Should I keep my 20 year old tax returns? ›
No, there is no need to keep tax returns that are 20 years old. According to the Internal Revenue Service website, the longest recommended period of time to retain tax records is seven years. This is the recommended time if you plan to file a claim for a loss from bad debt reduction or worthless securities.
Can I look up old tax returns online? ›
You can access personal tax records online or by mail, including transcripts of past tax returns, tax account information, wage and income statements, and verification of non-filing letters. If you need a transcript for your business, get a business tax transcript.
Can IRS come after you after 5 years? ›
Each tax assessment has a Collection Statute Expiration Date (CSED). Internal Revenue Code (IRC) 6502 provides that the length of the period for collection after assessment of a tax liability is 10 years. The collection statute expiration ends the government's right to pursue collection of a liability.
Does IRS debt go away after 10 years? ›
In general, the Internal Revenue Service (IRS) has 10 years to collect unpaid tax debt. After that, the debt is wiped clean from its books and the IRS writes it off. This is called the 10 Year Statute of Limitations. It is not in the financial interest of the IRS to make this statute widely known.
What is the 8 year rule IRS? ›
A lawful permanent resident (green card holder) for at least 8 of the last 15 years who ceases to be a U.S. lawful permanent resident may be subject to special reporting requirements and tax provisions. Refer to expatriation tax.
Can the IRS go back 14 years? ›
The IRS generally has 10 years from the assessment date to collect unpaid taxes from you. The IRS can't extend this 10-year period unless you agree to extend the period as part of an installment agreement to pay your tax debt or the IRS obtains a court judgment.
Can you get a tax refund from 10 years ago? ›
The latest date, by law, you can claim a credit or federal income tax refund for a specific tax year is generally the later of these 2 dates: 3 years from the date you filed your federal income tax return, or. 2 years from the date you paid the tax.
How far back can IRS go for unfiled taxes? ›
However, the statute of limitations for the IRS to assess and collect any outstanding balances doesn't start until a return has been filed. In other words, there's no statute of limitations for assessing and collecting the tax if no return has been filed.
The IRS and Department of Justice have cracked down on tax fraud and tax evasion regardless of its form. However, in recent announcements the Department of Justice has revealed its targeted enforcement focus on business payroll tax fraud, offshore tax fraud including non-compliance with FATCA & FBAR, Stolen Identity Tax Return Fraud (SIRF), and other forms of tax fraud. Beyond the enforcement focus, Acting Assistant Attorney General Caroline Ciraolo revealed that the Department of Justice’s Tax Division averages around 6,000 active matters. These cases are worked by approximately 340 attorneys, who are successful in more than 95 percent of the cases they prosecute.