The statute of limitations is the period within which an action may be taken by the IRS on a tax return. After the statute of limitations has run out on a given tax return, the government cannot assess additional taxes, and the taxpayer cannot amend the return to request a refund. In general, statute of limitations for a return runs for 3 years from the date the return was filed or return due date, whichever is later.
Statute of Limitations Exceptions
- If a fraudulent tax return is filed or no return is filed, there is no statute of limitations. The IRS may assess a tax deficiency at any time in the future.
- If a taxpayer omits an amount of gross income in excess of 25% of the gross income shown on the return, the statute of limitations is increased to 6 years. For example, if a return with gross income of $40,000 contains an omission of over $10,000 of gross income, statute is increased to 6 years.
- Statute of limitations for deduction of a bad debt or worthless securities is 7 years. This limitation applies only to the bad debt deduction or worthless security deduction; all other items on the return would normally close out after 3 years.