Statute of limitations - NO time limit?

[jeanmarc]

I've read that the IRS has no time limit for pursuing taxes if you never file a return or if they can prove civil or criminal fraud. However, another preparer is telling me it only applies in the cases of fraud. From what I understand, no time limit also applies if no tax return was ever filed. Can someone clarify this?

[IRonMaN]

Technically, the statute of limitations states from the date that the return is filed.

[jeanmarc]

Right, I've heard of that one but what if no return was ever filed? What's I've read in some articles is that they have no time limit then.

[IRonMaN]

It starts when filed.  If nothing is ever filed, the clock hasn't started ticking yet.  Of course the IRS isn't going to get the hounds out to track someone down because they owe $12.02 from a return they never filed in 1962, but that's why I used the word "technically" in my original post.

[jeanmarc]

That makes sense. I didn't think of it like that, "the clock never started ticking".

[BobKamman]

This is what the Internal Revenue Manual says:

4.12.1.3 (10-05-2010)

Enforcement Period

1. Policy Statement 5-133 (P-5-133), IRM 1.2.14.1.18, Delinquent returns—enforcement of filing requirements, discusses delinquent returns and the enforcement filing requirements. The enforcement period is not to be more than six years. However, the extent to which delinquency procedures will be enforced will depend upon the facts and circumstances of each case, and by reference to factors ensuring evenhanded administration of staffing and other Service resources. Enforcement for longer or shorter periods may be used when consideration has been given to:

   1. The taxpayer’s prior history of noncompliance.

   2. The existence of income from illegal sources.

   3. The effect upon voluntary compliance.

   4. The anticipated revenue in relation to the time and effort, required to determine tax due.

   5. Any special circumstances existing in the case of a particular taxpayer, class of taxpayer, or industry, or which may be peculiar to the class of tax involved.

4.12.1.3.1 (10-05-2010)

Management Approval

1. Management approval is necessary if the enforcement activity is less than or exceeds the six-year period. Document the case file by:

   1. Outlining the facts of the case; and

   2. Detailing the reasons on Lead Sheet 130, Multi-year and Related Returns Lead Sheet, why enforcement for the longer or shorter period is recommended. (Deviating from P-5-133). If warranted, attach supporting workpapers.

2. Group manager approval is not needed if the nonfiler voluntarily files returns beyond the established enforcement period.

[Terry53029]

26 U.S. Code § 6501 - Limitations on assessment and collection

(3)No return

In the case of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

[Taxes-by-Rocky]

And even though you file the tax return, there may be other situations where the statute doesn't begin until you file a particular form with that return (e.g., Form 8938).  Omissions of the foreign information forms and schedules seem to have that problem on a regular basis.

[dkh]

I'm curious why you're asking......  my bingo card says  "new client "