48.2 When the IRS Can Assess Additional Taxes

Three-year statute of limitations.

The IRS has three years after the date on which your return is filed to assess additional taxes. When you file a return before the due date, however, the three-year period starts from the due date, generally April 15.

Where the due date of a return falls on a Saturday, Sunday, or legal holiday, the due date is postponed to the next business day.

EXAMPLES
1. You filed your 2012 return on February 8, 2013. The last day on which the IRS can make an assessment on your 2012 return is April 15, 2016.
2. You filed your 2010 return on May 17, 2011. The IRS has until May 19, 2014 (May 17 is a Saturday), to assess a deficiency.
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image Caution
No Limitation Period for Fraud
There is no limitation on when tax may be assessed where a false or fraudulent return is filed with intent to evade tax, or where no return is filed.
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Amended returns.

If you file an amended return shortly before the three-year limitations period is about to expire and the return shows that you owe additional tax, the IRS has 60 days from the date it receives the return to assess the additional tax, even though the regular limitations period would expire before the 60-day period.

Six-year statute.

When you fail to report an item of gross income which is more than 25% of the gross income reported on your return, the IRS has six years after the return is filed to assess additional taxes. An item that is adequately disclosed is not considered an omission.

IRS request for audit extension.

If the IRS cannot complete an audit within three years, it may request that you sign Form 872 to extend the time for assessing the tax. However, where an individual was “scared” into signing such an agreement, it was held invalid. See the following Example.

EXAMPLE
Robertson, a plumber, won $30,000 in a sweepstakes. An IRS agent asked him to sign an agreement to extend the tax assessment deadline. Robertson never had any prior dealings with the IRS, he did not know that his return was under examination, and he was not in touch with the lawyer who prepared the return on which his sweepstakes winnings were averaged.
Robertson wanted to see his lawyer before signing Form 872, but the agent pressed hard for the signature, phoning him and his wife at home and at work 20 times in a week. The agent did not tell him the amount of additional tax that might be involved, or explain that if he refused to sign he would have an opportunity before the IRS and the courts to contest any additional tax. Instead, the agent’s comments gave him the impression that his home could be confiscated if he refused to sign. Robertson signed and the IRS later increased his tax.
Robertson argued that the agreement was not valid. He signed under duress. The Tax Court agreed. He convinced the court that he really believed he could lose his house and property if he did not comply. No adequate explanation of the real consequences of refusal to sign was made, although Robertson asked. Since he signed Form 872 under duress, the IRS could not increase his tax after the three-year period.
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