Collection statute-of-limitations


J

jhhtexas

Does preparation of a substitute-for-return by the IRS start the clock
on the 10 year collection statute-of-limitations for an individual
taxpayer?
 
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P

paultry

Does preparation of a substitute-for-return by the IRS start the clock
on the 10 year collection statute-of-limitations for an individual
taxpayer?
The date of assessment of the SFR starts the ten year clock.
 
G

Gene E. Utterback, EA, RFC, ABA

jhhtexas said:
Does preparation of a substitute-for-return by the IRS start the clock
on the 10 year collection statute-of-limitations for an individual
taxpayer?
From a practical standpoint, yes - from a technical standpoint, no.
The problem is that an SFR is NOT considered an actual return because either
you didn't sign it OR it wasn't the result of court order. In either case
the statute of limitations to ASSESS tax stays open UNTIL you either file a
signed return OR until a court (usually the tax court) issues a judgment.

So since the IRS CAN come back anytime in the future and ASSESS or REASSESS
the tax, the statute of limitations to collect that portion starts when that
tax is assessed. If you never filed a return for 1975 and the IRS prepared
an SFR, assessed a tax and you paid that tax OR the statute to collect that
tax has passed you're safe from that tax only. BUT the IRS could decide NOW
to audit that year, assess more tax, which would create a new statutory
period for collection. Alternatively you could FILE a signed return for
that period (assume) that results in LESS tax liability and have no ability
to get a refund - since the statutory period to claim a refund is 3 years.

TECHNICALLY - as I said first, from a practical standpoint I have never seen
or heard of the IRS bothering MOST people about an SFR vs. a signed return
once six years have passed. NOTE I said MOST people. I have heard
anecdotal stories about the IRS going after those with LARGE estates or on
who they've issued a jeopardy assessment - the premise being these folks
have/had money so let's make sure we get all we should.

Gene E. Utterback, EA, RFC, ABA
 
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D

D. Stussy

Gene E. Utterback said:
The problem is that an SFR is NOT considered an actual return because either
you didn't sign it OR it wasn't the result of court order. In either case
the statute of limitations to ASSESS tax stays open UNTIL you either file a
signed return OR until a court (usually the tax court) issues a judgment.

So since the IRS CAN come back anytime in the future and ASSESS or REASSESS
the tax, the statute of limitations to collect that portion starts when that
tax is assessed. If you never filed a return for 1975 and the IRS prepared
an SFR, assessed a tax and you paid that tax OR the statute to collect that
tax has passed you're safe from that tax only. BUT the IRS could decide NOW
to audit that year, assess more tax, which would create a new statutory
period for collection. Alternatively you could FILE a signed return for
that period (assume) that results in LESS tax liability and have no ability
to get a refund - since the statutory period to claim a refund is 3 years.

TECHNICALLY - as I said first, from a practical standpoint I have never seen
or heard of the IRS bothering MOST people about an SFR vs. a signed return
once six years have passed. NOTE I said MOST people. I have heard
anecdotal stories about the IRS going after those with LARGE estates or on
who they've issued a jeopardy assessment - the premise being these folks
have/had money so let's make sure we get all we should.
Gene's answer is better.

The date of assessment of the SFR does start the collection clock.
However, as assessment is still open, a later supplemental assessment can
restart the collection clock. Mere preparation of the SFR report does not
start any SOL clock.

For Gene: During my 6 years at the IRS, only once did I issue an SFR
outside of the 6 year window. It was for CoD income and the taxpayer in
question had been a non-filer for 12 years. I did it because the tax for
that year alone was larger than the sum of the taxes on the most recent 6
years for that person. This one one of my few "IRS summons" cases (for the
loan file).
 

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