Taxpayers: You Have a Right to Finality
When taxpayers are dealing with the IRS, they are entitled to finality. They have the right to know the maximum period they have to challenge the position of the IRS, the time the IRS can take to finish auditing the tax year, and when the IRS audit has been finished. Here are more details about the right to finality that taxpayers should know.
The Finer Details of the Right to Finality
From the date a taxpayer files his or her return, the IRS will have three years to do a review for any extra tax during the tax year in question. There are a few exceptions to the rule:
- When a taxpayer fails to file a return
- When a taxpayer files a fraudulent or false return
In both cases, the IRS will have no time limitation to assess the tax for the year in question.
The IRS has a 10-year period after the assessment date in which it can collect unpaid taxes from a person. This period can only be extended if court judgments are obtained, or a person agrees to a tax debt repayment plan that extends the period. The IRS can suspend the 10-year collection period and pick up where it left later during periods where it cannot collect. Such periods include when the taxpayer is involved in a collection due process (CDP) proceeding or an ongoing bankruptcy.
Taxpayers who believe that they overpaid taxes can file refund claims. The claims have to be filed two years from the date a person paid the tax or within three years of the date the person filed the original return, whichever is later.
The IRS can send a taxpayer a statutory note of deficiency to propose additional taxes. The taxpayer has 90 days (or 150 days if he or she was out of the country when the notice was mailed) to file a petition with the U.S. tax court.
Generally, taxpayers will only be subject to one audit or examination per tax year. Nevertheless, the IRS can reopen a return that had been previously examined if it finds that necessary, such as if there is evidence of the taxpayer filing a fraudulent return.
The right to finality is one of the rights in the Taxpayer Bill of Rights (TBOR). Another crucial right that taxpayers should be aware of is their right to retain representation. Taxpayers can consult with lawyers for tax relief help and any other tax-related assistance.