As most taxpayers know, under Internal Revenue Code (Code) Section 6501(a), the Internal Revenue Service (IRS) generally has three years after a tax return is filed to assess any additional tax. However, Code Section 6501 provides several exceptions to this rule, including but not limited to the following.
- False or fraudulent returns with the intent to evade tax (unlimited assessment period)
- Willful attempt to defeat or evade tax (unlimited assessment period)
- Failure to file a return (unlimited assessment period)
- Extension by agreement (open-ended or for a specific period)
- Adjustments for certain income and estate tax credits (separately provided in specific statutes)
- Termination of private foundation status (unlimited assessment period)
- Valuation of gifts of property (unlimited assessment period)
- Listed transactions (assessment period remains open for one year after certain information is furnished)
- Substantial omission of items (six-year assessment period)
- Failure to include certain information on a personal holding company return (six-year assessment period)
If the IRS issues a notice of deficiency and the taxpayer files a petition in the Tax Court, the statute of limitations on assessment is extended until after the Tax Court’s decision becomes final. See Code Section 6503(a); see also Roberson and Spencer, “11th Circuit Allows Invalid Notice to Suspend Assessment Period,” 136 Tax Notes 709 (August 6, 2012).