The IRS Statute of Limitations is an important concept to understand regarding taxes. This statute of limitations limits how long the IRS can legally collect taxes and audit and assess taxes. It is important to clearly understand the IRS Statute of Limitations to protect yourself and your finances. This blog will explain the IRS Statute of Limitations in detail so that you can ensure that you are taking steps to stay within the time limits.
What is the IRS Statute of Limitations?
The IRS Statute of Limitations is a legal time limit on how long the IRS can legally collect taxes, audit, and assess taxes. This statute of limitations is designed to protect taxpayers and ensure that taxpayers do not face undue hardship due to the IRS’s actions. Understanding the Statute of Limitations is important to protect yourself from any potential issues that may arise due to the IRS’s actions.
When Does the Statute Begin?
The Statute of Limitations for the IRS begins the day after the tax return is due or the day after the return was filed, whichever is later. This means that the IRS can begin collecting taxes, auditing, and assessing taxes from the day after the due date or the day after the filing date.
How Long Does the Statute Last?
The Statute of Limitations for the IRS typically lasts for three years. This means that the IRS has three years to legally collect taxes, audit, or assess taxes from the taxpayer. After the three years is up, the IRS can no longer legally take any action against the taxpayer.
What Happens if the Statute is Ignored?
If the IRS ignores the Statute of Limitations, the taxpayer can file a legal action against the IRS to obtain relief from any potential action taken by the IRS. This legal action is known as a “tolling of the statute” and allows taxpayers to seek relief from the IRS’s action.
What are the Exceptions to the Statute?
A few exceptions to the Statute of Limitations can allow the IRS to take action beyond the three-year period. These exceptions include if the taxpayer failed to file a tax return, provided false information on their return, or fraudulently attempted to evade taxes. In these cases, the Statute of Limitations does not apply, and the IRS can take action against the taxpayer at any time.
How Can You Best Utilize the Statute?
To best utilize the Statute of Limitations, it is important to ensure that you are filing your tax returns on time and accurately reporting all of your income. Additionally, it is important to keep detailed records of your taxes and be aware of any potential IRS audits or assessments. Taking these steps ensures that you stay within the time limit set by the Statute of Limitations.
By understanding the IRS Statute of Limitations, you can protect yourself and your finances from any potential issues arising from the IRS’s actions. It is important to ensure that you are filing your tax returns on time and accurately reporting all of your income to stay within the Statute of Limitations.