Many criminal offenses have a statute of limitations for how long law enforcement can wait before charging a person with a violation. This principle is to ensure that potential convictions come from evidence that has not deteriorated with time.
The failure to pay back taxes is an infraction with a statute of limitations in some instances. However, many cases exist where the Internal Revenue Service has no time limit for pursuing back taxes.
No statute of limitations for missing or fraudulent returns
If the IRS can prove that a taxpayer has not filed a return or has filed a fraudulent or false return, the agency has no time limit on taking action. In fact, the IRS has no statute of limitations if it can establish that the individual willfully attempted to evade paying tax.
The department can also assess additional penalties and interest fees for these violations. Still, the IRS often prefers to avoid handling these matters through the judicial system. Cooperative individuals might be able to work out a payment plan and avoid criminal liability.
The limit for collecting on filed returns
The only time limit for IRS action for back taxes applies to the due date of the return or the date the taxpayer filed the return, whichever comes later. From this point, the IRS has three years to assess taxes.
However, if the filer omits over 25% of gross income from these forms, the statute of limitations extends to six years. Additionally, the IRS has 10 years to collect the debt. Various circumstances exist where the agency can extend the collection time.
Charges for tax mistakes can have heavy penalties, including fines and imprisonment. Anyone facing prosecution for back taxes should carefully review the case’s details to determine ways to minimize penalties.