Statutory Limitation Periods for Assessment of Tax
- Assessment Required, IRC §6501(a).
- Assessment of tax is a prerequisite to collection of tax.
- Assessment occurs when authorized IRS employee signs Form 23-C.
- IRS cannot assess a tax after the statute of limitations on assessment has expired even if the taxpayer agrees to the assessment. Rev. Rul. 72-42, 1972-1 C.B. 398.
- Three-Year Rule, IRC § 6501.
- Three years from later of:
- Due date of return; or
- Date return is filed.
- A timely mailed return is treated as filed on the due date of the return even if it is received by the IRS after the due date. IRC § 7502.
- Amended returns do not extend the original 3-year period. Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934).
- Consent Exception to Three-Year Rule.
- Three-year rule can be extended by agreement. IRC § 6501(c)(4).
- Must be in writing.
- Must be signed by taxpayer (or authorized representative) and IRS before expiration of original three-year rule or prior timely consent to extend.
- Exception - statute of limitations on assessment of estate tax cannot be extended by agreement. IRC 6501(c)(4).
- Suspension of Three-Year Rule.
- Timely issuance of proper and valid notice of deficiency. IRC § 6503(a)(1).
- Application for Taxpayer Assistance Order. IRC § 7811(d).
- Bankruptcy petition. IRC § 6503(h).
- Receivership. IRC
§§ 6036 and 6872.
- Summons issued by IRS to third-party. IRC §§ 7609(a), 7609(l), and 7609(f).
- Designated summons issued by IRS to corporate taxpayer. IRC § 6501(k).
- Six-Year Exception to Three-Year Rule, IRC § 6501(e).
- Income Tax - underreporting of more than 25% of the gross income stated on the original return.
- Estate Tax - underreporting of more than 25% of the gross estate.
- Gift Tax - underreporting of more than 25% of gifts for taxable period.
- Filing of correct amended return does not shorten the six-year rule if it applied to original return. Houston v. Commissioner, 38 T.C. 486 (1962).
- Fraud and Unfiled Return Exceptions to Three-Year Rule.
- The three-year rule does not apply to the assessment of taxes (and associated interest and penalties) attributable to a false or fraudulent return. IRC § 6501(c)(2).
- In 1995 the Tax Court held that IRS could assess tax, penalty, and interest for the years 1964 to 1970 because taxpayer had filed false or fraudulent returns for those years. Levitt v. Commissioner, T.C. Memo 1995-464 (1995).
- Filing of non-fraudulent amended return does not eliminate fraud exception to three-year rule. Badaracco v. Commissioner, 464 U.S. 386 (1984).
- IRS has burden of proving fraud before fraud exception to three-year rule can be applied.
- In the case of a failure to file a return, the tax may be assessed at any time. IRC § 6501(c)(3).
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