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.
What is the statute of limitations for IRS fraud? ›
In addition, there is no time limit for the IRS or FTB to assess income tax if a taxpayer did not file a tax return or filed a false or fraudulent return. Once the IRS assesses income taxes, it has 10 years within which to collect the assessed taxes.
Can 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.
Can the IRS go back 25 years? ›
HOW LONG CAN THE IRS COLLECT BACK TAXES? Generally, under IRC § 6502, the IRS can collect back taxes for 10 years from the date of assessment.
How far back can I get tax records from the IRS? ›
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.
How far back can the IRS investigate tax fraud? ›
How far back can the IRS go to audit my return? 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.
How many years is considered tax evasion? ›
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.
How many years can the IRS go back to collect money? ›
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 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.
Does the IRS ever forgive debt? ›
The IRS ultimately determines whether you qualify for debt forgiveness. However, the agency generally considers taxpayers who meet these criteria: a total tax debt balance of $50,000 or less, and a total income below $100,000 for individuals (or $200,000 for married couples). Need to talk to a tax relief specialist?
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.
What is the IRS 7 year rule? ›
Period of limitations that apply to income tax returns
Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
How far back can IRS go for unfiled taxes? ›
The IRS has an unlimited amount of time to assess tax for a period where no return was filed. Technically, you should keep your records forever for any tax year where you did not file a return, but in practice the IRS doesn't commonly go back more than six years when enforcing filing requirements.
How far back do IRS transcripts go? ›
You can get transcripts of the last 10 tax years. Transcripts are free. Online orders can be downloaded immediately. Phone and mail orders take 5-10 days.
What will trigger an IRS audit? ›
Unreported income
The IRS receives copies of your W-2s and 1099s, and their systems automatically compare this data to the amounts you report on your tax return. A discrepancy, such as a 1099 that isn't reported on your return, could trigger further review.
Can I look up old tax returns online? ›
You can access your 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.
What constitutes fraud with the IRS? ›
A "fraudulent return" is a return in which the individual is attempting to file using someone else's name or SSN on the return or where the taxpayer is presenting documents or information that have no basis in fact.
Is there an IRS statute of limitations? ›
Generally, the statute of limitations allows the IRS to assess taxes due for a tax year for three years from the due date of the return or the date it was filed, whichever is later.
How much does the IRS pay for reporting fraud? ›
The IRS Whistleblower Office pays monetary awards to eligible individuals whose information is used by the IRS. The award percentage depends on several factors, but generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower's information.
Is there a statute of limitations on money owed to IRS? ›
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).
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.