Tax Term of the Week

Statute of Limitations - The IRS has set specific time periods before expiration of certain actions (i.e. to collect a tax, make an assessment to an account, to request a refund, to file bankruptcy, etc).

The most common statute for tax debtors, the collections statute, is usually 10 years after the liabiliy is assessed. However, these terms can be extended due to such things as bankruptcy and failed Offer-In-Compromises.

3 Years and 1 Day Too Late

At times, a taxpayer should have received more money at the end of the year than they did. You might have missed out on a refund if you made an error on your tax return. If you discover an error after your return has been mailed, you have a chance to submit an Amended U.S. Individual Tax Return. You would do this if you found that you reported your filing status, deductions or credits, or total income incorrectly. If you find this to be the case, use IRS form 1040X and attach a copy of the original return.

Now here’s the catch: generally, to claim a refund, Form 1040X must be filed within 3 years from the date you filed your original return or the actual date of filing. That’s right ladies and gentlemen…If the IRS owes you money, you only have 3 years to collect it from them. On the other hand, if you owe the IRS, they have 10 years to collect that money from you. I am sure you aren’t surprised. I mean, we are talking about the IRS here.

Cheers!
- Taxus