It's not clear which statute you're referring to. The tax
code provides distinct statutes of limitation for
assessment, collection, and refunds. There is no statute of
limitations on an unfiled return, meaning there is no time
limit for IRS to prepare an SFR. Once assessed, the 10-year
collection statute of limitations applies. The refund
statute of limitations technically does not apply to SFRs
but on a practical level the issue is moot because IRS is
not known to make SFR assessments for years it is clear the
taxpayer had an overpayment. The refund statute of
limitations (3 years) does apply to original returns filed
following an SFR assessment.
You heard correctly, but there's still a running statute.
Theoretically, certain IRS employees can prepare a return
for you and sign it, but the IRS Regs say that deficiency
procedures apply to that return (e.g., right of petition to
Tax Court), and that the processing of that return thus does
not commence the running of the statute of limitations. So
what IRS does practically is simply prepare a zero return
(what IRS calls the SFR), unsigned by anybody, and posts it
to computer. Then they lay an examination assessment on top
of it, when legally permitted to do so-- t/p agrees to the
tax, defaults in response to the statutory notice, or
petitions the Tax Court which upholds a deficiency amount.
So the date the deficiency assessment is posted commences
the usual 3-year clock, subject to other limitation periods
on refund claims with respect to when payments were made.
Exceptions to this involve employment taxes, where
deficiency procedures differ, and to an income tax case
where the delinquent t/p files an acceptable return after
IRS has posted the zero SFR.
The period of limitations does not start because an SFR has
been processed. However, the assessment of the tax on the
SFR (which may end up on a 90-day letter) will start the
collection period for that amount.
There is no statute of limitations on an un-filed returned,
which means the IRS can come along and make an assessment at
any point in time. HOWEVER, once that assessment is made,
the collection statute clicks in.
Contrary to what others might think, the ASSESSMENT on an
SFR has a 10 year collection statute just like any other
assessment and will expire. I've certainly seen this happen
on several occasions.
The trick is that assessment dates are different than tax
years. For example, if you are "waiting out" a 1993 SFR
assessment. That assessment does not run out on 4/15/2004.
It runs out ten years from whenever it was assessed--most