Taxpayer Bill of Rights: The Right to Finality

From the Desk of Lauran Corcoran

Taxpayer Bill of Rights: The Right to Finality

This right is of particular importance to taxpayers and one that is often misunderstood. The timeframes laid out below seem straightforward. However, within each of the articulated timeframes below, there are definitional terms used by the IRS that might confuse or mislead the taxpayer. Careful attention and understanding of terms such as “paid” and “filed” will determine whether or not the applicable timeframe has expired.

The Right to Finality: Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year. Taxpayers have the right to know when the IRS has finished an audit.

What does The Right to Finality mean?

• The IRS generally has three years from the date the return was filed to assess the tax. There are some limited exceptions to the 3-year rule, such as not filing a return or filing a fraudulent return.

• The IRS generally has ten years from the assessment date to collect unpaid taxes from you. However, there are a number of circumstances where the ten-year collection period may be suspended, such as during the period when the IRS cannot collect, e.g., bankruptcy or a collection due process proceeding, or an offer in compromise is pending.

• If you believe you have overpaid your taxes, you can file a refund claim asking for the money back. Generally, you must file a refund claim within 3 years from the date you filed your original return, or 2 years from the date you paid the tax, whichever is later.

• Generally, you will only be subject to one examination per taxable year. However, the IRS may reopen a taxable year that has been previously examined if the IRS finds it necessary (e.g., there is evidence of fraud).

If you missed last week’s blog: Taxpayer Bill of Rights: The Right to Pay No More Than the Correct Amount of Tax