The statute of limitations on IRS assessment determines how long the government has to assess additional tax after a return is filed. After the limitations period expires, the IRS cannot assess additional tax for that year - no matter what errors or omissions exist on the return. Understanding the applicable limitations period is essential for knowing when you are truly safe from audit exposure, how long to keep records, and how to respond when the IRS requests an extension of the statute.
Standard: 3 years. The IRS generally has 3 years from the later of (a) the date the return was filed or (b) the return's due date to assess additional tax. A 2024 return filed on April 15, 2025 has a statute expiring April 15, 2028. A return filed early - say February 1, 2025 - is treated as filed on the due date, so the statute still expires April 15, 2028.
Substantial omission: 6 years. If the taxpayer omits from gross income an amount exceeding 25% of the gross income stated on the return, the limitations period is extended to 6 years. A taxpayer who reports $100,000 of gross income but omits $26,000 (more than 25%) faces a 6-year statute. Gross income for this purpose means all income before deductions.
Fraud or no return: unlimited. If the taxpayer files a false or fraudulent return with intent to evade tax, or if no return is filed at all, the statute of limitations never runs. The IRS can assess at any time, with no expiration. A non-filed return from 20 years ago remains open indefinitely.
The 3-year period begins when the return is filed. If a return is filed before its due date, it is deemed filed on the due date - the early filing does not start the clock earlier. A late-filed return starts the clock on the actual filing date. An amended return (Form 1040-X) does not restart the statute for the original return. The exception is §6501(c)(7): if, within the 60 days ending on the day the statute would otherwise expire, the IRS receives a signed written document showing additional tax owed, the period to assess that additional amount does not expire before 60 days after the IRS receives it.
The IRS frequently requests that taxpayers sign Form 872 (Consent to Extend the Time to Assess Tax) when an audit cannot be completed before the statute expires. Signing Form 872 voluntarily extends the limitations period to a specified date, giving the IRS more time to complete the examination. Taxpayers are not legally required to sign Form 872, but refusing can prompt the IRS to immediately assess the maximum amount it believes is owed without completing the audit - often a worse outcome than granting a limited extension. If you do sign, negotiate for a limited extension (6 to 12 months) rather than an open-ended consent, and ask for the right to file a protest before assessment.
The limitations period cuts both ways - it also limits the taxpayer's ability to claim refunds. Under IRC §6511, a refund claim must be filed within the later of 3 years from the date the return was filed OR 2 years from the date the tax was paid. If a taxpayer files a return and pays tax on April 15, 2022, they must file a refund claim by April 15, 2025 (3 years from filing). If they pay additional tax on June 1, 2022 after the original filing, the claim is still timely until April 15, 2025, because the later of 3 years from filing (April 15, 2025) or 2 years from payment (June 1, 2024) controls. The 2-year-from-payment rule extends the deadline only when it ends later, such as for tax paid more than one year after the return was filed.
The standard guidance is to keep tax records for at least 3 years from the filing date. But given the 6-year rule for substantial omissions and the unlimited period for fraud, a more conservative approach keeps records for 7 years. Records relating to property (basis records for real estate, stocks, partnership interests) should be kept until 3-7 years after the property is sold, since the basis determines gain or loss in the sale year. Business records supporting depreciation deductions should be kept for the life of the asset plus 3-7 years. FBAR records must be kept for 5 years under FinCEN regulations.