Statute of Limitations for IRS Refunds
The Internal Revenue Service (IRS) statute of limitations refers to the time period that the IRS may take action related to an income tax return. This action may include granting the taxpayer a refund, assessing amounts of tax due or collecting upon previously assessed tax liabilities.
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General Statute of Limitations for Refunds
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Individual taxpayers who have failed to file a tax return are entitled to claim a refund by filing within three years from the original due date of the individual income tax return. For example, if the original due date was April 15, 2010 (for tax year 2009), the taxpayer would have three years, until April 15, 2013, to file a tax return and claim a refund. The IRS does not levy a late filing penalty when the individual income taxpayer did not have an obligation to file and is only filing to claim a refund.
Exceptions
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The statute of limitations may be extended if the taxpayer filed an extension to extend the original tax return deadline. Since the IRS offers an automatic six-month extension for individual taxpayers filing Form 1040, 1040A or 1040EZ, a six-month extension would have extended the original return date in our above example to October 15, 2010 and, thus, the statute of limitations to claim a refund would have been extended until October 15, 2013.
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Amended Return
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When taxpayers have previously filed a return, they are allowed three years from the date they originally filed their return to amend the return and claim an additional refund amount. The statute of limitations is thereafter extended an additional three years from the date the amended return is filed. In the instance of multiple amended returns, the statute of limitations can, theoretically, be extended indefinitely.
Because of this extension of the statute of limitations, taxpayers who are nearing the three-year statute of limitations to claim a refund and do not have available all tax documentation to do so are often advised to file an estimated return and to subsequently amend.
Other Implications
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The statute of limitations also applies to the IRS' ability to assess tax liabilities or to collect upon an assessment. The IRS has the same three-year statute of limitations to assess the taxpayer with additional tax due. This statute of limitations is extended a further three years each time an amended return is filed.
Once the IRS has assessed a balance due, the IRS generally has a ten-year period during which it may attempt to collect the amounts assessed, although this may be extended based upon legal proceedings or agreements with the taxpayer.
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