There is a statute of limitations for the IRS to contest an income tax return and begin to collect a deficiency. So what is a statute of limitations? The statute of limitations provides a final date where the IRS cannot begin new collection action on a tax return. Here’s the kicker – a return that is not filed is not protected by a statute of limitations. If you don’t take anything else away from this post, take this: you should always file your tax returns on time.

The three year statute of limitations means, normally, that after three years, the IRS cannot readjust your return. So if you had some questionable matter in your 2003 tax return and you filed it before April 15, 2003, you can breathe a sigh of relief. You are probably good to go. The flipside is, any return that is fraudulently prepared or returns that omit 25% of gross income.

Collection Statute Expiration Date

“I thought the IRS could come after you for ten years?” Well, that is the collection statute expiration date. Once the IRS has assessed the taxes you owe then they can attempt to collect those taxes from you for ten years. A taxpayer can consent to extend the collection statute, but I rarely advise clients to do so. This statute of limitations is different from that above because the statute of limitations above deals with accepting or rejecting a return and assessing the taxes and/or penalties. The collection statute actually deals with how long the IRS can come after you for the taxes you owe.

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