Taxpayers and representatives often ask us: how long does the IRS have to make changes to an individual income tax return and assess additional taxes? Another way to phrase this question is: how long is the IRS’s “statute of limitations on assessment” for individual income taxes? In most cases, the answer is that the IRS can assess additional taxes within three years after the date when the taxpayer filed a tax return. IRC § 6501. However, three years after the tax return filing date is not always the answer.

IRC Section 6501 addresses situations when the IRS’s three-year statute of limitations on assessment is not applicable. We highlight some of the most common exceptions we see below, but advise you to review IRC Section 6501 for other exceptions.

1. IRC Sections 6501(c)(1), (2), and (3) state that the IRS can assess taxes at any time when a taxpayer files a “false or fraudulent return,” “willfully attempts to evade tax,” or does not file a return. This exception is applicable to all tax types.

2. IRC Section 6501(c)(4) allows the IRS and taxpayer to extend the statute of limitations on assessment by agreement. This exception is applicable to all tax types.

3. IRC Section 6501(c)(7) states, when a taxpayer files an amended return in the sixty-day period before the three-year statute of limitations on assessment expires, the IRS has sixty days from the date it receives the amended return to make an additional tax assessment, even when the sixtieth day is after the expiration of the three-year statute of limitations on assessment.

4. IRC Section 6501(e), “Substantial Omission of Items,” states that, in the case of income taxes, when a taxpayer omits gross income in excess of 25 percent of the amount of gross income stated on the original tax return, and the gross income omitted is in excess of $5,000, the statute of limitations on assessment is extended from three years to six years. IRC 6501(e)(1)(B)(ii) explains how to calculate “amounts omitted from gross income.”

We recommend that taxpayers always consider the IRS’s statute of limitations on assessment, and pay particularly close attention in the following circumstances: federal, state, and local audits; intentional reporting of false information on a filed tax return; meritless positions on a filed tax return; and, criminal tax matters. The IRS’s statute of limitations on assessment can also be a significant concern when determining how long to keep a taxpayer’s documents and information.

Taxpayers and their representatives should not assume that the IRS has the authority to make an assessment. They should closely examine the facts of each case to determine the IRS’s ability to assess additional taxes. Taxpayers or representatives needing additional guidance regarding the IRS’s ability to assess additional taxes should seek the help of an experienced tax professional to determine if any exceptions to the IRS’s three-year statute of limitations on assessment are applicable.