How the IRS Right to Finality Affects Tax Assessment, Collections, and Audits

How the IRS Right to Finality Affects Tax Assessment, Collections, and Audits

What Does the Right to Finality Mean for IRS Tax Issues?

The right to finality is one of ten basic taxpayer rights outlined in the IRS Taxpayer Bill of Rights. “Finality” means that a taxpayer will know exactly when the IRS has resolved a tax matter, from assessing and collecting taxes to audits.

For tax audits, as an example, taxpayers will know:

  • How long the IRS can audit returns and collect back taxes
  • When the IRS completes an audit
  • How much time they have to appeal an IRS audit

In most cases, the IRS can audit a taxpayer only one time per year. They may reopen an audit from a previous tax year, however, if they find additional return items to investigate.

How Long Does the IRS Have to Assess Taxes?

The IRS has three years to assess a taxpayer’s federal return. This starts from the date the taxpayer filed. For example, if someone e-files in April 2023, then the IRS has until April 2026 to audit that return.

When can the IRS Review Taxes Beyond Three Years?

Exceptions to a three-year assessment include filing fraudulent tax returns or failing to file returns when they should have been filed.

If someone earning $100,000 per year fails to file returns for the past five years, and IRS systems flag this, the IRS can file substitute returns on behalf of the taxpayer and conduct audits for all five years.

How Long Does the IRS Have to Collect Back Taxes?

The IRS can collect back taxes for up to 10 years. In other words, if a taxpayer did not file a federal tax return in 2012, the IRS can no longer attempt to collect unpaid taxes due on that return in 2023. The Collection Statute Expiration Date of 2022 has already passed.

Can the IRS Extend the 10-Year Collection Statute Expiration Date?

This 10-year limit cannot be extended, except for individuals who owe taxes and have entered into an IRS installment agreement. In rare cases, the IRS may file a court motion to extend the CSED if they can prove egregious fraud or criminal conduct on the part of the taxpayer.

Can the IRS Suspend the CSED?

Yes, the CSED may be suspended if the IRS knows the person with a tax debt has filed for bankruptcy, or the taxpayer already has an ongoing collection proceeding against them.

In Addition to Right to Finality, What Other Rights Does a Taxpayer Have?

Taxpayer Bill of Rights (TBOR) states that taxpayers also have rights to:

  • Quality service
  • Be informed about all matters involving the IRS
  • Pay only the correct amount of taxes owed
  • Challenge the position of the IRS and to be heard by the IRS
  • Appeal IRS decisions within an independent forum
  • Privacy
  • Confidentiality
  • Retain representation, legal or otherwise
  • Interact with a fair and just tax system

What Should a Taxpayer Do If They Think the IRS Has Violated Their Right to Finality or Other TBOR Rights?

The IRS established an independent department called TAS (Taxpayer Advocate Service) that offers free assistance to taxpayers who think the IRS has violated their rights. TAS helps individuals suffering hardship who have not been able to resolve tax issues with the IRS.

Eligibility for TAS assistance does not cover taxpayers who are under investigation for filing fraudulent tax returns or other illegal activity. To contact TAS, call 1-877-777-4778 or visit https://taxpayeradvocate.irs.gov/get-help/.

If you have questions or need advice, you can start online by answering 6 simple questions. You can also call us at 866-568-4593.

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