The basics of statute of limitations


When is your tax return free from IRS audit? From your point of view, statute of limitations prevents the IRS from collecting a deficiency in tax or beginning a civil or criminal case. Statute of limitations provides a date of finality after which the IRS or the taxpayer can take no further actions. We can breathe a little easier when we know that our returns are out of the line of fire.

Three-year Statute of Limitations:

Normally, the IRS must assess tax, or file suit against the taxpayer to collect the tax, within three years after the return is filed.  The three-year period of limitation on assessment also applies to penalties. The statute increased to four years if you omit 25% of your gross income. There is no statute for fraudulent returns. The statute never runs out and you can be audited anytime.

When the Statute Runs

The statute of limitations on assessment begins to run on the day after you file your return. Thus, the day of filing is excluded from the computation of the three-year period. For example, taxpayers who filed their 2015 Form 1040 on 4/15/16 are free after 4/15/19 as the IRS can’t assess a deficiency after that date. A return filed early is considered filed on the due date of the return. A return filed after the original due date, is considered filed on the date the return is actually received by the IRS. Extending the due date of the return does not shorten the assessment period.

Example 1:

If you filed your 2016 Form 1040 return on 3/5/17, the return was deemed filed on 4/15/17, and thus, the IRS can’t assess a tax deficiency after 4/15/20. If the return was extended to 10/15/17, and was filed on that date, the period of assessment would run from 10/15/17 to 10/15/20.

Example 2:

If you filed your 2013 Form 1040 return on 4/15/14, the federal statute would have ran out on 4/15/17. But if you did not file until recently on 3/31/17, they can get you until 3/31/200. Tough luck. Even worse is if you have not filed, there’s no statute and they have forever to get you.

Reminder for Non-filers: Again, the countdown never starts for a return that not filed.


1. The usual “out” for a taxpayer under stress is to close the audit fast.

2. Consider going the opposite way: slow down the process.

3. Time can be in your favor. The IRS is not a model of efficiency.

4. Auditors get sick, go for medical checkups, and take care of their kids just like the rest of us.

5. They are promoted, transferred, or fired. In the meantime, the statute can run out.

6. They have only 36 months from the time you file to the time they close the audit.

7. IRS Manual instructs them to finish audit within 28 months.

8. They only have eight months to close your audit, a narrow window for complicated cases.

9. The strategy: speed up or slow down depending on the issues of your case.

10. If you still have missing records by the last filing deadline, file anyway and amend later.

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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California. 

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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies.  He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at


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