Tax Debt Help – Form 982 to the Rescue
Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form |
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Tax Debt Help – Time Limit Strategies
The IRS has three years to give you a refund, three years to audit your tax return, and ten years to collect any tax due. Together, these laws are called the statute of limitations. They put time limits on various tax-related actions that you and the IRS can take.
You have 3 years to claim a tax refund.
This is measured from the original deadline of the tax return, plus three years. For example, your 2004 tax return was due on April 15th, 2005. 2005 plus 3 is 2008. You have until April 15th, 2008, to file your 2004 tax return and still get a tax refund. File your 2004 return after April 15th, 2008, and your refund “expires.” It goes away forever. This is called the statute of limitations for claiming a refund.The tax code says that you have three years from the original filing deadline to claim a refund.
The IRS has 3 years to audit your tax return or to assess any additional tax liabilities.
This is measured from the day you actually filed your tax return. If you filed your taxes before the deadline, the time is measured from the April 15th deadline. For example, you filed your 2006 tax return on February 15th, 2007. The 3-year time period for an audit begins ticking from April 16th, 2007, (the filing deadline) and will stop ticking on April 16th, 2010. On April 17th, 2010, the IRS cannot audit your 2006 tax return unless there is a suspicion of tax fraud.
The IRS has 10 years to collect outstanding tax liabilities.
This is measured from the day a tax liability has been finalized. A tax liability can be finalized in a number of ways. It could be a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. From that day, the IRS has ten years to collect the full amount, plus any penalties and interest. If the IRS doesn’t collect the full amount in the 10-year period, then the remaining balance on the account disappears forever. The statute of limitations on collecting the tax has expired.
Example of the Statute of Limitations
Let’s provide an example based on a real-life scenario. Mr. Smith wants to file 6 years of tax returns: 2001 through 2006. All years he has refunds. If he files by April 15th, 2007, Mr. Smith will receive refunds for his 2003, 2004, 2005, and 2006 tax returns. His refunds for 2001 and 2002, however, have expired.Let’s change the example slightly. Mr. Smith wants to file 6 years of tax returns: 2001 through 2006. In 2001 and 2002, he could have received a refund. In 2003, 2004, and 2005, he owes. Mr. Smith cannot apply his 2001 or 2002 refunds as an estimated tax payment towards his 2003 taxes. His refunds have expired. For the 2003 to 2006 tax returns, the IRS has ten years to collect the full tax, plus penalties and interest, from the date Mr. Smith actually files the returns. If Mr. Smith has a refund for 2006, that refund will be used to pay off his tax debts.
Action Plan Item
It is in your best interest to file your tax returns at your earliest possible convenience. First, you can claim refunds. Second, it starts the clock ticking on the 3-year statute for audits and the 10-year statue for collections.
Tax Law References
- Internal Revenue Code, Section 6501 (3-year audit statute),
- Section 6502 (10-year debt collection statute), and
- Section 6511 (3-year refund statute).
For more information on how the IRS manages these statute of limitations, see Internal Revenue Manual, 25.6.1, Statute of Limitations.
Tax Debt Help – State Tax Amnesty Programs
Find out what tax amnesty is all about, especially the difference between limited-time-only amnesty programs and on-going voluntary disclosure initiatives. Get tax relief for those tax returns you haven’t filed, or back taxes you are trying to pay off.
The Arizona Department of Revenue is offering a limited-time tax relief program for people and businesses who participated in tax shelters. Taxpayers may submit amended tax returns to disclose their participation in a tax shelter in exchange for relief from penalties. Program ended on April 1, 2005.
California’s Franchise Tax Board is offering tax amnesty for people and businesses who haven’t filed their tax returns, or who substantially understated their tax obligation. Ended March 31, 2005.
Connecticut’s Department of Revenue Services offers tax relief for people and businesses who haven’t filed their tax returns, who haven’t paid their back taxes, or who have understated their tax obligations.
Washington DC’s Office of Tax and Revenue offers tax relief for people and businesses who haven’t filed tax returns, who haven’t paid their back taxes, or who have understated their tax obligation.
Businesses that haven’t filed or paid their taxes can get tax relief for their business and payroll taxes.
People and businesses who haven’t filed their tax returns may be eligible for tax relief from the state of Idaho. The State Tax Commission may waive penalties if you file and pay your taxes.
Indiana’s Department of Revenue is offering tax amnesty for people and businesses who haven’t filed their tax returns, or who substantially understated their tax obligation. Ends November 15, 2005.
Indiana’s Department of Revenue offers tax relief for people and businesses who haven’t filed tax returns, who haven’t paid their back taxes, or who have understated their tax obligation.
The Minnesota Department of Revenue offers tax relief for businesses that have not filed their sales and use tax returns.
The Minnesota Department of Revenue is offering a limited-time tax relief program for people and businesses who participated in tax shelters. Taxpayers may submit amended tax returns to disclose their participation in a tax shelter in exchange for relief from penalties. Program ends on January 31, 2006.
Mississippi is offering tax amnesty for people and businesses who haven’t filed their tax returns, or who substantially understated their tax obligation. September through December 2004.
The Missouri Department of Revenue offers tax relief to people and businesses who have not filed or paid their taxes.
North Carolina’s Department of Revenue offers tax relief for people and businesses who haven’t filed tax returns, who haven’t paid their back taxes, or who have understated their tax obligation.
Pennsylvania’s Department of Revenue offers tax relief for people and businesses who haven’t filed tax returns, who haven’t paid their back taxes, or who have understated their tax obligation.
Rhode Island is offering tax amnesty for people and businesses who haven’t filed their tax returns, or who substantially understated their tax obligation. Ends on September 30, 2006.
South Carolina’s Department of Revenue offers tax relief to out-of-state businesses who have not filed or who have not paid their SC taxes.
South Dakota’s Department of Revenue offers tax relief for businesses that have not filed or have not paid their sales and use tax, or contractor’s excise tax.
Tennessee’s Department of Revenue offers tax relief for businesses that have failed to file their sales, use, excise, or franchise taxes.
The Utah State Tax Commission offers tax relief to businesses that have failed to file or to pay taxes.
Vermont’s Department of Taxes offers tax relief for people and businesses who haven’t filed tax returns, who haven’t paid their back taxes, or who have understated their tax obligation.
The State of Washington is offering tax relief for business that have failed to file or failed to pay their taxes.
Wisconsin’s Department of Revenue offers tax relief for people and businesses who haven’t filed tax returns. Offers partial relief from penalties.
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