IRS Assessment and Collections

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IRS Assessment and Collections

One of the many services the IRS performs is ensuring everyone has paid the correct and full amount of taxes owed. When you submit your annual tax return, the IRS conducts a tax assessment. This assessment acts as an official record of your filing and evaluates whether your return is correct.

If an IRS assessment finds that you owe money, they’ll send you a balance due collections notice for your tax liability.

Keep reading for answers to frequently asked questions about IRS assessments and IRS collections.

What Is an IRS Tax Assessment?

An IRS tax assessment is the official recording of your tax debt on the IRS’s books. If you file your taxes and owe money to the government, the IRS will conduct a tax assessment to determine how much you owe and review if it aligns with what you filed.

What Is the Statute of Limitations for the IRS to Assess Taxes?

Often, an original assessment is available soon after filing your taxes. But, the IRS has a statute of limitations for tax assessments and can update your assessment for up to three years after the date of filing or the date the return is due (whichever date is later).

However, if you’ve failed to claim more than 25% of your gross income when you filed taxes, the statute of limitations can extend for up to six years.

There is no statute of limitations on tax assessments if:

  • You didn’t file a return for the tax year
  • You filed a fraudulent return in order to avoid paying taxes

In these two situations, the IRS can assess and come after you for taxes at any time.

Can the IRS Assess Taxes If You Didn’t File a Tax Return?

It’s important to note that avoiding or forgetting to file your taxes won’t get you out of a tax assessment. In fact, failure to file means the IRS can conduct a tax assessment under the Substitute for Return (SFR) program. Under the SFR program, the IRS prepares your tax return with information from third parties, such as your employers, banks, and other relevant sources, and it then files a tax return on your behalf.

You should always file your taxes, as an SFR doesn’t work in your favor for tax assessments. First, with a substitute return, the three-year statute of limitations doesn’t apply, and the IRS can assess the tax return anytime. Second, any tax credits and deductions you may have been eligible for will not be added by the IRS when they create your return for you.

What Actions Will the IRS Take to Collect Taxes?

The IRS will do all that it can to collect taxes, following a specific set of steps. Those steps are:

  • File an assessment.
  • Send an IRS collections notice detailing how much is owed and when it’s due.
  • If left unpaid, the IRS may file a Notice of Federal Tax Lien.
  • The IRS has the authority to issue a levy to seize assets (wages, money in bank accounts, retirement income, Social Security benefits) and property (real estate, cars, boats, etc.) to pay the tax debt. Additionally, they can garnish income sources such as future federal tax refunds and state income tax refunds.

How Long Can the IRS Collect Back Taxes After Assessment?

Once the IRS assessed taxes, they have 10 years from that date to collect the tax liability. However, this isn’t always a straight 10-year span. There are several circumstances where the IRS can “pause” the collections window, extending their ability to collect beyond 10 years from the assessment date.

Some situations that can extend the 10-year window include bankruptcy, submitting an Offer in Compromise, applying for an IRS Installment Payment Plan, and more.

How Do You Find Out Your IRS Assessment Date?

There are two main ways to confirm your IRS assessment date. You can find your assessment date in your Tax Account Transcript report or Record of Account Transcript. Make sure you request a copy of the report for the same tax year as the assessment is for.

Both of these transcript reports are available online and include the exact date the IRS created your tax assessment.

Remember, knowing your IRS assessment date is beneficial to understand when the statute of limitations expires.

Can the IRS Extend the Time for Tax Collection?

Yes, the IRS can extend the time for tax collection. The situations when the IRS can extend the tax collection window are:

How Can Wiztax Help?

Call us today at (866) 568-4593 to learn more about how we can help with your IRS audit. You can also start here to take our free online evaluation.

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