The IRS typically has three years, to audit your returns. The overarching federal tax statute of limitations runs three years after you file your tax return.
If warranted, the IRS must make an additional tax assessment within the later of three years from:
- The return due date
- The date the return was filed.
However, a 6-year statute of limitations on tax assessments applies to a substantial understatement of income which exceeds:
- 25% of AGI
- $5,000 for certain assets attributable to foreign financial assets.
There is no statute of limitations when a taxpayer fails to file a return, files a false return, or otherwise willfully attempts to evade tax. Consequently, in such situations, the IRS is free to assess tax at any time (i.e. fraud).
Taxpayers may extend the statute of limitations date. For example, the IRS may ask the taxpayer to extend the statute if it looks like the audit will not be concluded in time. It is incumbent on the taxpayer and their representative to determine if an extension of the statute is in the taxpayer’s best interests.
In general under IRC § 6502, the Internal Revenue Service 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.