Statute of Limitations on Tax Assessments

An assessment is where an appointed IRS assessment officer records a taxpayer’s liability by signing a summary record of assessment. The summary record of assessment provides the taxpayer’s identification, the character of the liability, the taxable period, and the amount of the assessment. The date of assessment is the date the summary record is signed by an assessment officer. See IRC §6203. Once an assessment is made, the tax becomes due and the IRS can begin following collection procedures.

What procedures must be followed for the IRS to make an assessment?

In general, for the IRS to assess a tax the taxpayer must sign an assessment (such as a tax return) or the IRS must issue the taxpayer a notice of deficiency. See IRC §6213(a). This notice is the taxpayer’s ticket to tax court, for the taxpayer has 90 days (150 if mailed outside the United States) to petition the tax court for a redetermination of the IRS’s proposed deficiency. If the taxpayer does not petition the court within the prescribed time, or receives an unfavorable final decision from the tax court, the assessment officer can sign the summary record of assessment. See IRC §6213(a).

Mathematical or Clerical Errors

If the Taxpayer is notified that a mathematical or clerical error appears on their return, the IRS does not need to follow normalassessment procedures when making an assessment.  See IRC §6213(b)(1). It is the author's opinion that the IRS overuses this provision of the code to circumvent Congressional intent of providing taxpayers with the opportunity to go to tax court before an assessment is made.  When a taxpayer receives a notice of a mathematical or clerical error, the Taxpayer has 60 days to file for an abatement of the IRS's assessment which requires the IRS to follow normal deficiency procedures.  See IRC §6213(b)(2)

How long does the IRS have to make an assessment?

In general, the IRS has the longer of three years from the date the return was due, or filed, to make an assessment. See IRC §6501(a).

Some Notable Exceptions to the three year rule

Tax Penalties

As a general rule, additions to tax (penalties and interest), shall be assessed in the same manner as income tax. See IRC §6671(a). However, the failure to file, pay, or show penalties together with the estimated tax penalties are exempt from the normal deficiency procedures and are payable upon notice and demand from the IRS. See IRC §6665(b).