Tax Topic 160: Statute Expiration Dates Explained

When it comes to taxes, it’s important to know that certain expirations apply. Not only do taxpayers have to abide by certain timelines, but so does the Internal Revenue Service. This article will take a closer look at important expiration dates for all taxpayers, as discussed in Tax Topic 160.

What is Tax Topic 160?

The IRS created a series of informational articles to help taxpayers understand specific tax issues without having to refer to multiple dense publications. These articles are known as tax topics.

Tax Topic 160 refers to certain expiration dates regarding federal tax returns. There are 3 specific subjects that Tax Topic 160 focuses on:

• RSED: Refund Statute Expiration Date
• ASED: Assessment Statute Expiration Date
• CSED: Collection Statute Expiration Date

As comprehensive as these articles may be, there are some missing details that taxpayers have to search for elsewhere. Let’s take a look at each of these topics to see if we can cover them in more depth.

What is the Refund Statute Expiration Date?

The IRS defines the Refund Statute Expiration Date (RSED) as “the end of the time period for which a taxpayer can make a claim with the IRS for a tax credit or tax refund pertaining to a specific tax year(s).”

In other words, the RSED is the date after which you may not ask the IRS for a refund. But how do you know if the IRS owes you money in the first place?

How do I know if I overpaid the IRS in taxes?

Normally, taxpayers can expect a tax refund for overpaid taxes when they file IRS Form 1040 before the tax filing deadline. The IRS website states that they can direct deposit refunds to your bank account for electronically filed income tax returns in 3 weeks or less, even during tax season. The normal timeframes for paper returns can be as long as 6 months.

For a correctly filed return, a taxpayer can always track their status on the “Where’s my Refund” page. Once on the page, you’ll simply need the following information, from your federal tax return:

• Your Social Security or taxpayer ID number
• Your filing status
• The exact refund amount on your return

You can check your refund status 24 hours after having filed your electronic return. For amended returns filed electronically, you may need to wait 3-4 business days before seeing an update on the website.

But what if you’re not sure whether the IRS processed your tax return properly? You might want to make sure that you and the IRS have the same information. You can do this by asking for your tax information from the IRS files.

How to obtain your IRS records

There are several ways you can request your tax information from the IRS records.

Requesting your income tax return

You can always file IRS Form 4506, Request for Copy of Tax Return, to receive an actual copy of your income tax return. This might be a good option for taxpayers who:

• Have lost their original tax information or original tax return
• Changed tax professionals and don’t want to request copies from their old tax preparer

You can request tax returns from multiple tax years or multiple tax periods. The IRS charges $43 for each return requested.

If you already have tax returns, but are looking to compare your records to the IRS files, you can simply request your tax transcripts.

Requesting a copy of your tax account information

Instead of asking for a copy of each tax return, you or your tax professional can simply request a copy of tax transcripts by filing IRS Form 4506-T, Request For Transcript of Tax Return. This is helpful for taxpayers and tax professionals who:

• Want to compare their files to the IRS records
• Are requesting records over multiple years or tax periods
• Do not want to pay for their tax returns

Depending on the circumstances, you may also request your tax transcript from the IRS website directly. However, if you’re working with a tax pro, such as a CPA or enrolled agent, this option is only available to the taxpayer. Your tax professional cannot request your tax transcript through the IRS website.

Once you receive your tax returns or tax transcripts, what do you do next? You need to see if the information matches your records or if there’s something else holding up your refund.

Why you might not have received your refund yet

It’s good practice to compare your records to what the Internal Revenue Service has in their files. When you do, you’ll likely find the reason that you haven’t received your tax refund. Here are 8 of the more common reasons the IRS has held up your refund.

You’ve claimed certain tax credits

Due to the potential for tax fraud, the Internal Revenue Service treats certain tax credits with extra scrutiny. Taxpayers who claim one or more of these credits may experience:

• Increased chances for tax audits
• Higher likelihood of IRS correcting their tax return
• Longer waiting times for refunds, or finding out there is no refund at all

Some of the tax credits posing the highest audit risk include:

• Earned Income Tax Credit (EITC)
• Additional Child Tax Credit
• Educational credits, such as the American Opportunity Tax Credit and the Lifetime Learning Credit

Additionally, there may be increased audit risk for taxpayers who took advantage of certain tax incentives during the coronavirus pandemic. This includes programs such as the Paycheck Protection Program loans and the Recovery Rebate Credit.

You filed an amended tax return

Until tax year 2021, all amended tax returns were required to be filed as paper tax returns. Processing paper returns requires extra time under normal circumstances.

However, during the coronavirus pandemic, paper returns took even longer due to IRS staffing shortages. Those staffing shortages still exist today, although they are not as drastic as they were during shutdowns caused by the pandemic.

You can electronically file an amended return for the three most recent taxable years prior to the current one. However, if you are looking to file a tax return from a prior year, you still have to file by paper.

This delay in processing time doesn’t just impact amended returns. It affects all paper returns.

You filed a paper tax return.

The IRS states it can take up to 16 weeks to process paper tax returns. However, anecdotal evidence from multiple sources indicates that it can take much longer.

Your tax refund went to pay off some sort of debt.

Under the Treasury Offset Program, the federal government can use your tax refund to pay off certain types of debts, even if they are not tax debts. This is known as a tax offset.

Below are some examples of debts that the Treasury Department can use your income tax refund to offset:

• Past-due child support
• Federal agency non-tax debts
  • For example, IRMAA payments due to the Social Security Administration
• Outstanding state income tax liability
• Certain unemployment compensation debts owed to a state
  • Compensation paid due to fraud, or
  • Owed contributions to a state fund that weren’t paid

If you filed a joint tax return and your refund offset was for your spouse’s outstanding debt, there is some recourse. By filing IRS Form 8379, Injured Spouse Allocation, you may be able to claim the part of your tax refund allocated to you.

Your tax refund went to the wrong bank account.

If this happens, you’ll have to discuss this directly with your bank’s customer service department. The IRS states that it is not responsible for refund disbursements that are sent to the wrong bank account holder due to taxpayer error.

Your tax return is missing information or is incomplete.

The vast majority of tax returns are reviewed automatically by automated IRS systems designed to process millions of forms. So when there is missing information, such as a Social Security number, the automated system flags it for further review.

As previously discussed, a manual review can take much longer to process. For this reason, it is vitally important to ensure that your tax return is complete and accurate.

You’ve been a victim of tax fraud.

One of the biggest trends in identity theft is the use of a taxpayer’s identity to claim a fraudulent refund. A frustrating aspect about tax fraud is that there is more than one way for tax filers to have their identity improperly used for tax purposes. As a result, there’s more than one way to report this type of activity to the IRS.

So it’s important for you to be able to identify the type of fraud that occurred to you so you can use the correct IRS form to report it to the correct IRS office. Here are some common ways to report suspected tax activity:

• IRS Form 14039: Identity Theft Affidavit
  • The most likely starting point for someone who believes that their identity was stolen for fraudulent tax refund purposes
• IRS Form 14157-A: Tax Return Preparer Fraud or Misconduct Affidavit
  • Use this form if you believe that your tax preparation firm falsely filed your income tax return without your permission or otherwise committed tax fraud using your tax information
• IRS Form 14242: Report Suspected Abusive Tax Promotions or Preparers
  • If you believe someone is promoting abusive tax promotions, schemes, or strategies, use this form to report them, even if you haven’t been a victim

For additional information about how the IRS helps with identity theft, check out the IRS phishing and online scams page.

What do you do if the IRS owes you money?

Generally, taxpayers have a certain period of time to request an IRS refund. This period of time is the later of:

• 3 years after having filed the original tax return, or
• 2 years after having paid the taxes owed on the tax return

If you file a claim after the three-year period, but within two years from the time you paid the tax, the credit or refund cannot be more than the tax you paid within the two years immediately before you filed the claim.

However, the Internal Revenue Manual does have procedures in place to make certain allowances for taxpayers who have previously been in communication with the IRS on their tax issues. So even if you don’t have all of your information, you should contact the IRS.

You can file IRS Form 843, Claim for Refund and Request for Abatement, if you believe the IRS did one of the following:

• Improperly withheld tax
• Improperly imposed additional tax or
• Improperly calculated interest or penalties on the tax that was owed

If your filing is successful, the IRS will automatically recalculate any interest or penalties that were imposed on the original tax liability.

What is the Assessment Statute Expiration Date?

The next important date in Tax Topic 160 is the Assessment Statute Expiration Date, or ASED.

The ASED is the end of the period of time during which the IRS can assess tax for a particular tax year. Normally, the IRS must assess tax liability within the later of:

• Three years from the date of receipt of an original tax return
• Three years from the due date of the return

Of course, there are certain situations in which the IRS may extend the ASED.

Time to assess tax can be extended

There are several instances which can grant the IRS an extension of time for assessing your tax bill.

Failure to file your tax return

If you fail to file your tax return voluntarily, then the IRS can assess tax under the Substitute for Return (SFR) program. If your return was filed under the SFR program, it does not set the three-year time limitation for the IRS to assess any additional tax.

This means IRS can assess tax and any additional tax at any time. If you decide to file your tax return, then a three-year time limitation is set, and the IRS can assess tax during this period.

Signing an extension agreement

The IRS can extend the amount of time required to assess taxes with your written agreement. If the IRS makes an offer to extend the ASED, you can:

• Sign the time extension as it is written
• Negotiate with the IRS
• Refuse to sign the waiver

Generally, the IRS will grant some incentive in order to extend an ASED.

Omitting significant amounts of taxable income from your tax return

If you omitted more than 25% of your gross income from a tax return, the time the IRS can assess additional tax increases from three to six years from the date your tax return was filed.

False or fraudulent returns

In the case of a false or fraudulent tax return, there is no statute of limitations or expiration date on the IRS’ ability to assess tax, additional tax, penalties, or interest.

But once the IRS assesses taxes due, there is also a limited period of time to collect taxes. This period of time is also known as the Collection Statute Expiration Date.

What is the Collection Statute Expiration Date?

Finally, we come to the last item in Tax Topic 160, the Collection Statute Expiration Date, or CSED. Each tax assessment comes with its own unique CSED, depending on the assessment date.

Examples of tax assessments with their own CSED include:

• Original tax assessments from voluntarily filed returns
  • Most individually filed tax returns
• Tax assessments arising from amended tax returns
• Substitute for Return tax assessments made by the IRS
• Assessments imposed during a tax audit
• Civil penalty assessments

How long is the CSED?

Normally, the CSED is up to 10 years after the tax is assessed. However, the CSED can be suspended or extended, based upon certain actions. These suspensions and extensions are usually reactions to taxpayer actions or requests.

When can the CSED be suspended?

During a suspension, the IRS may not take collection action. Examples of times when the CSED may be suspended include:

• When the taxpayer requests an installment agreement. This can be done online in certain situations, or by filing IRS Form 9465
  • If request is rejected, the IRS will add another 30 days to the suspension before resuming the collections process
• When the taxpayer submits an offer in compromise
  • If request is rejected, the IRS will add another 30 days to the suspension before resuming the collections process
• If the taxpayer files for bankruptcy
  • Suspension during bankruptcy proceedings
• If the taxpayer requests a collections due process (CDP) hearing
• If a taxpayer files for innocent spouse relief on IRS Form 8857.

When can the CSED be extended?

Unlike a suspension, the CSED extension does not limit IRS collection activity. Most CSED extensions come after a period of suspension:

• Bankruptcy
  • 6 month extension after the bankruptcy has ended
• If the taxpayer requests a CDP hearing
  • If less than 90 days remain until the CSED when the IRS issues its final determination, the collection period is extended to 90 days from the date of the final determination.
• Innocent spouse relief
  • In certain situations, may be extended for up to 60 days after case resolution

We’ve written more extensively for taxpayers who wish to learn how to find out their IRS CSED.

Conclusion

Most taxpayers will never need to worry about statutory expiration dates. Either your tax professional will keep your tax records straight, or the IRS will promptly inform you of any mistakes you might have made.

But if this is a concern to you, then you should probably talk with your accountant, financial planner, or the IRS.