IRS Statute of Limitations: What You Need To Know

What scares you? Heights? Spiders? The dentist? Things that go bump in the night?

How ‘bout the Internal Revenue Service?

Do you dread Tax Day? Or worse, do you live in fear of a phone call, a registered letter, or maybe even a knock on the door about an audit, an assessment, or maybe even a tax return you didn’t file? Scary! And it could come at any time, right?

Actually, that isn’t precisely right.

Would it allay any of your trepidation about the IRS to know that in most cases, those tax scares can’t happen at just any old time? At least, they can’t be a fear factor forever. There are limits to how long the IRS can or will hound you about your taxes, thanks to its system of statutes of limitations. Those statutes come at varying lengths depending on what the predicament is with your taxes, but when the one that applies to you expires, your willies about the IRS willies can go away.

Not, mind you, that we recommend you try to out-wait an IRS statute of limitations. Quite the opposite. Why would you want to risk the penalties for running afoul of the taxman or woman? Yes, the U.S. tax code is famously complicated, but if you don’t use a tax preparation service, the IRS offers plenty of do-it-yourself online help for filing accurately and on time so you can stay far away from its punitive side. There are reasonably simple ways to keep your panic at bay, starting with keeping accurate records, staying organized, and using easily accessible tax filing software. That way, you won’t have to worry about which specific statute of limitations applies to the tax regulation you might have violated.

If you are worried, though, read on as we explore the IRS system of statutes of limitations.

Tax Statute of Limitations: Filed and Unfiled Tax Returns

Let’s make sure everyone understands what a statute of limitations is and how it works. It’s a law that puts a deadline on prosecuting a crime or filing a lawsuit. If the deadline passes before the crime is charged or the legal claim is made, the charge or claim is no longer valid.

As statutes of limitations relate to problems with your filed tax returns, the IRS legally can no longer come after you once the applicable statute has expired.

So how long must you wait for an IRS statute of limitations to run out? Could be three years. Could be six years. Could be 10 years. The length depends on what the IRS is pestering you about, whether it’s an audit of your return, a tax assessment after you’ve filed your return, the effort to collect the tax you owe from a filed return or criminal charges for your tax fraud. There is even a statute of limitations on how long you have to claim your refund. (Hint from Captain Obvious: You really don’t want to wait that one out.) Those all come into play for IRS issues arising from returns you’ve filed.

If you don’t file your return … well, that tax violation doesn’t come with a statute of limitations. If you fail to file a return at all, the IRS legally has all the time it wants – months and months of Sundays if that’s what it takes — to frighten you with that phone call, letter, or knock on your door.

But even failing to file can come with a favorable caveat. This isn’t etched in stone or statute of limitations law, but the IRS generally deems your unfiled tax debt as uncollectible and gives up after six unsuccessful years of trying to bring you to its justice. Unless there are mitigating circumstances, you should be able to breathe more easily if you didn’t file a return and stayed a step ahead of the IRS law by the end of six years. We’ll detail that situation a little later.

Most tax-related transgressions aren’t as egregious as failure to file, though. Remember, the formal system of IRS statutes of limitations applies to filed returns that require action to be taken either by the taxpayer or by the government. In most cases, these deadlines work in favor of you, the taxpayer, because they stop the IRS from trying to collect taxes based on your returns from years ago. That info should ratchet the intimidation level down a bit, shouldn’t it?

We’ll look at the IRS statutes of limitations next.

Filed Tax Returns: Assessments and Collections Statute of Limitations

To be clear, let’s define tax assessments, tax audits, and tax collections.

A tax audit is an IRS examination of your return to verify its accuracy.

A tax assessment is the process in which the government determines how much you are required to pay in taxes. Essentially, it’s a judgment based on your return. If the assessment shows you owe money, the IRS sends you a balance-due notice.

As you might expect, tax collection is the process by which the government tries to make you pay what you owe once it has assessed your tax liability from your return. It begins with the balance-due notice and includes a letter explaining the balance along with any penalties and interest accrued after the tax was due. The IRS provides options to help you meet your tax obligation during the collections process. However, if you don’t proactively seek that help and don’t make your payment, the government can file a tax lien to notify creditors of your debt and eventually can seize assets such as your wages and bank accounts.

None of that is likely to happen if you’re accurate and on time about filing income taxes. But if there are errors or questions about your return, there is a statute of limitations for each of those IRS actions. We’ll discuss those next along with a couple of other tax situations that have statutes of limitations attached.

Tax Assessment

As with an audit, the statute of limitations on a tax assessment is three years from the later date of when your return was due or when it was filed. The same six-year extension exception applies as well if your return fails to include more than 25% of your total gross income. And again, if you sign an agreement with the IRS, the statute expiration date may be extended.

One other note about a tax assessment. There is no statute of limitations if you’re found to have filed a fraudulent or false return. In that case, the IRS can take as long as it wants to assess additional taxes against you.

Tax Audit

In most cases, the IRS has three years to initiate an examination of your return, which means your last three returns can be subject to a tax audit if you file every year. The statute of limitations begins either on the day the return was due or the day it was filed, whichever is later. So, if you filed your return on April 15, 2024, the audit statute for that return expires on April 15, 2027. For that reason, it’s a good idea to keep at least the last three years of your tax records.

However, there are exceptions to the three-year limit. If it wants more time, the IRS can ask you to sign an agreement to extend the deadline, which you can decline. But it can audit returns from as far back as six years without your permission if it finds a major error in a more current return. If, for example, it finds your return reported less than 25% of your total gross income, the IRS can extend the audit statute to six years.

Tax Collection

Let’s say a tax has been assessed against you and the IRS starts the getting-you-to-pay process. According to this statute of limitations, it has 10 years from the day the assessment was made to collect what it says you owe. If after 10 years it hasn’t done it, the IRS writes off the balance. But as with audits and assessments, exceptions to the collection deadline are possible. Litigation, a due process hearing, or an offer in compromise can extend the timeframe.

It’s worth noting that if you haven’t filed your taxes, the IRS can try to forcibly collect from you by issuing a substitute for return (SFR) to establish the tax amount you’ll be assessed. An SFR is a tax return prepared by the IRS without using deductions or exemptions that would have been available to the taxpayer if he or she had filed it, so it doesn’t work in your favor. If that happens, the 10-year statute of limitations begins on the date the SFR is issued.

Claiming Tax Refund

What if you’re owed a refund? Yay! But what if your return either didn’t reflect it or underestimated how much you’ve got coming? Boo! Assuming you filed on time and made an error that cost you some or all your refund, you can amend that return as long as you do it three years from the date it was originally filed or two years from the date you paid the taxes on that return.

Criminal Tax Charges

If the IRS is convinced you’ve committed tax fraud or evasion and intends to file a criminal charge, a statute of limitations gives it six years to do it. The six-year clock starts running on the filing date if the IRS bases its investigation on your return. If there is no return, the six-year timeline starts on the date of what the IRS determines was the taxpayer’s ‘last willful act’ associated with avoiding paying taxes or violating tax laws. Pinpointing a last willful act is difficult, but it generally involves finding evidence that the taxpayer knew what his or her legal tax requirements were and chose not to carry them out.

Unfiled Tax Returns: Statute of Limitations

No statute of limitations is in play when you simply don’t file your tax return. The long arm of the IRS law can take as much time as it needs to collar you for that, meaning technically it could levy penalties even decades later if it determines that you purposely and regularly didn’t file to evade paying your taxes.

But in most cases, the IRS won’t look back at your record and try to enforce filing requirements on returns older than six years. By then, it generally figures you’re never going to pay the debt you owe the government and lets you slide. Remember, though: That six-year mark isn’t a statute of limitations. It isn’t a requirement; it isn’t the law. The IRS can and will blow past it and continue to investigate your tax-paying past (or lack of tax-paying past) if your debt is significantly large, if it finds evidence of fraudulent behavior, or if it needs information related to your other tax issues.

And don’t forget that the IRS won’t sit idly by and pretend your failure to file is A-OK during those first six years. It will start by giving you a chance to file a delinquent return; if you do, the statute of limitations system for filed returns kicks in. If you don’t, the IRS will issue an SFR (substitute for return) to try to make you pay and penalize you when you don’t, typically bringing its hammer down (read: penalties) within three years of your failure to file.

And what is that hammer? As it can in the collections process for tax assessments on filed returns, the IRS can charge interest on how much it says you owe. It can garnish your wages. It can file a tax lien, which is a legal claim against your real estate, financial assets, and personal property. And it can file fraud charges that carry sentences of up to five years in prison and fines of up to $100,000 on conviction.

The IRS can bring criminal tax evasion charges whether they involve a filed return or a failure to file, but in either case, the six-year statute of limitations applies. If the charge is civil tax fraud, though, there is no applicable statute of limitations. The government can take as long as it wants or needs to initiate a prosecution.

Bottom line: The longer you go without filing a return, the worse it gets for you.

Now that’s scary.

It’s worth mentioning again that the IRS will only be interested in your failure to file if you owe money to the government. If you have a refund coming and don’t file … well, it’s your loss unless you take it upon yourself to get that late return submitted within three years from the original filing due date. The IRS won’t file a substitute return and cut an unsolicited check for you.

But for people whose failure to file was because of circumstances beyond their control such as a natural disaster or serious illness, the government does offer help in the way of IRS payment plans that can provide flexibility on monthly installments toward back taxes, extend the time limit on paying the tax debt, or even compromise on the size of the debt.

• Read More: What to Do if You Did Not File Taxes

Federal vs. State Tax Statutes of Limitations

Most people pay state taxes in addition to federal income tax. (You folks who live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming? We envy your freedom from state income tax.) For those who do pay it, the statute of limitations system at the state level generally is similar to the federal system.

Of course, exceptions exist. Some states give their tax authorities four years to audit a return instead of the three allowed by the IRS. In Louisiana and Minnesota, the statute of limitations on audits expires after three and a half years.

California and Illinois give their revenue departments 20 years to start the collection process, while Iowa, Utah, and Nebraska must initiate it within three years. That’s compared to the 10 years the federal government gets to finish collecting taxes.

So, while in most cases a state’s system mirrors the IRS system, there are enough differences to make it wise to research your state’s tax return requirements if a statute of limitations will be critical to your state-level tax issue.

Does the IRS Forgive Tax Debt After 10 Years?

The federal statute of limitations on collection of taxes expires 10 years from the day the IRS issued its tax assessment of what you owe. So yes, the government essentially forgives the balance of your tax debt if it hasn’t successfully collected it from you after 10 years.

But as with most tax rules and regulations, that deadline isn’t absolute. The statute of limitations on collections can be extended beyond 10 years under certain circumstances such as criminal tax fraud, bankruptcy filing, or other events. For example, if you declare bankruptcy, creditors can’t go after your resources until the bankruptcy is discharged, which suspends the IRS statute of limitations on collections.

The 10-year statute of limitations can be extended, too, if you as the taxpayer take certain actions while trying to meet your tax obligation, such as filing a compromise offer, appealing the collection process, or applying for a Taxpayer Assistance Order. In those cases, the IRS likely will request that you sign a waiver of the statute.