When it comes to dealing with the IRS, many taxpayers feel a sense of dread—and for good reason. The IRS, while powerful, does not have a reputation for precision. In fact, the agency is often wrong, and taxpayers can be left sorting through the mess. One critical area where the IRS often stumbles is in applying the Statute of Limitations (SOL), the time limit for certain IRS actions, such as audits or collections. Understanding how the IRS frequently miscalculates the SOL could help you protect your rights and push back when they overstep.
What is the Statute of Limitations (SOL)?
The Statute of Limitations essentially places a deadline on how long the IRS can take certain actions:
- Audits – The IRS generally has three years from when you file your return to audit it. However, if you underreport your income by 25% or more, that window extends to six years. If you fail to file a return or commit fraud, there’s no limit—the IRS can audit anytime.
- Collections – For unpaid taxes, the IRS has 10 years from the date they assess the tax to collect it. After that, they are supposed to stop all collection efforts.
Sounds simple, right? Not so fast. The IRS often messes up when calculating these deadlines.
How Does the IRS Get the SOL Wrong?
One of the most common errors involves “tolling events,” which pause or extend the SOL. These events include filing for bankruptcy, submitting an Offer in Compromise (OIC), or requesting a Collection Due Process (CDP) hearing. Each of these can temporarily stop the clock, but the IRS can (and does) miscalculate how long the pause lasts, incorrectly extending the SOL.
Another frequent mistake happens when the IRS doesn’t correctly record when a return was filed or tax was assessed. This could lead to the IRS attempting to collect taxes or audit a return long after the deadline. For taxpayers, this can feel like being chased for a debt that should have been closed years ago.
What Can You Do When the IRS Makes Mistakes?
If you think the IRS is acting outside the SOL, you have options:
- Request your account transcripts using IRS Form 4506-T. This will give you a breakdown of your tax history and show how the IRS calculates dates.
- You can challenge the IRS’s actions by appealing or disputing their calculation. Working with the Taxpayer Advocate Service (TAS) can sometimes help resolve complex issues.
- Know your rights – Familiarizing yourself with IRS procedures in the Internal Revenue Manual (IRM) can give you the upper hand when dealing with SOL miscalculations.
The IRS might not always be right, but it’s up to taxpayers to hold them accountable. Knowing the limits of what the IRS can do—and when they’ve gone too far—can save you from unnecessary headaches and stress.
