IRS Collection Statute Of Limitations Question

Joint Tax returns filed timely for 1988, 1989 and 1990 with large unpaid tax due.

Bankruptcy freeze lasted about 1-2 years at most.

One spouse claimed Innocent Spouse went to Tax Court was granted Innocent Spouse (case pending in Tax Court 1-2 years maximum).

No amended returns ever filed. No Consents extending time ever signed by culpable spouse.

They have remained resident in this country continuously (never even traveled abroad).

IRS says some type of "assessment" was made in 2003 (12 years after the last tax return was filed) and that some type of "Examination Freeze" has been in place since the mid-1990s. Thus according to IRS no SOL issue at all.

IRS asserts the Statute of Limitations is STILL open for Collection of the old tax due years. 20 years after the last tax due return for 1990 was filed.

SOL has been raised continuously for past year, but IRS has levied the person's Social Security Disability check at the maximum (57%) rate and will not release Levy or process an Appeal based on the Statute.

Is it possible under these facts that the SOL for Collection is still open permitting ongoing/never ending levies of social security checks?

As usual, thanks in advance.

Reply to
Michael
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As the period of limitations for collection is based on the assessment date, yes it is still open.

However, given these facts, I have a difficult time accepting that the 2003 assessment is valid. The latest year, 1990, was filed in 1991, and its normal 3-year period expires in 1994. Even with 4 years of suspended periods, that reaches only into 1998. I don't see anything that makes an additional 5 years of suspension for the 2003 assessment to be valid in the first place.

Reply to
D. Stussy

Did the other spouse sign a consent?

If they can prove tax fraud for the 1990 return then the statute of limitations is forever. Did the IRS prepare the 1990 return?

It looks like the 'some type of "Examination Freeze" has been in place since the mid-1990s' caused the statue of limitations clock to stop running. Is this even possible?

Reply to
removeps-groups

I'm with D. Stussy on this one - something sure seems to be missing.

The SOL "TOLLS" (gets set aside, essentially temporarily stopping the clock) for certain things, including:

1 - pending court activity at the Tax Court; 2 - pending activity in Bankruptcy court; 3 - consideration of an OIC - until the IRS either accepts or rejects it; AND

(drum roll please)

4 - IF the taxpayer signs an agreement to extend the statute - Form 872.

You'd be surprised to see how many folks actually sign off on this and don't remember doing so. All too frequently they will be scared into signing it. Typically the IRS will say "if you don't agree to extend the statute we'll issue a Statutory Notice of Deficiency and you'll have to petition the tax court" which scares many people into signing.

The only way the IRS could assess as late as they have is if the statute got extended somehow. If you haven't done so already, get an account transcript and record of account from the IRS. This should show the dates of all activity - including the tolling of the statute and any filing of any extensions on the statute. Once you get the account transcript and record of account from the IRS you'll have a better idea of WHY the IRS thinks they can collect now.

Good luck, Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

Folks:

Thanks for your responses. The one that might pose a problem is fraud for one or all 3 of the filed tax returns in question (1988, 1989 and

1990). Taxpayer indeed embezzled money back then (never charged criminally).

I had never heard of an "exam freeze" being legitimately cited as the reason to extend a collection statute. Transcripts have been requested. But I'm sure they will show the 2003 assessment (14 years after earliest of the 3 returns was filed) but I'm not sure they will show how/why they assessed something in 2003.

I did not realize the filing of a fraudulent tax return gives the IRS "forever" to collect.

Thanks again.

Reply to
Michael

Filing a fraudulent return may give the IRS "forever" to assess, but it won't affect the 10 year collection statute. An old but helpful outline on statutes here:

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Reply to
paultry

here:

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Paultry....Thanks for the link. The Collection Division's intransigence (or worse) in refusing to drop collection even after the Statute of Limitations has emphatically--verbally however not in writing--been raised as an absolute bar on them continuing to Levy the only "asset" of the taxpayer (her Social Security Disability Check and at the max. rate of 57%) has me about ready to file a formal complaint with TIGTA.

They have also stonewalled all efforts to file an Appeal (a previous CDP Appeal was withdrawn before the sought Conference was held, but the IRS has it as Filed/No Show/Determination Made, therefore "Appeal already held").

Thanks for all the help from you folks here.

Michael

Reply to
Michael

here:

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I'd try Taxpayer Advocate. May not resolve the issues but it should define them. If IRS has 2003 assessment(s), collection statute will, of course, still be open, but I'd want to see the basis for the assessment(s).

Reply to
paultry

The burden of proof of tax fraud is on the IRS. If there's no civil fraud penalty as part of the assessment, the IRS never even asserted that fraud was present.

Sometimes, the IRS will put a freeze on an account if the taxpayer has filed a lawsuit in any federal court (even when it doesn't involve taxes). Such freezes are erroneous, but do happen. Were you involved in another type of lawsuit in the period spanned?

It doesn't. It gives them forever to assess, which stops when they actually assess.

Reply to
D. Stussy

Paultry and Mr. Stussy:

Thanks again.

We've invoked Taxpayer Advocate (one of the biggest misnomers in history) who, in addition to giving us false hope for months before pulling the plug--TAS was approached in July of 2010, kept coming up with different reasons why they could not help until they finally cited "only one CDP Appeal per taxpayer" reason as a refusal to forward a recent CDP Appeal. 6 1/2 months of wasted time, effort, etc.

As stated the previous "appeal" was sought to be withdrawn--no Hearing was ever held in Appeals-- but written up as "submitted" and considered "Appeal #1 back in 2008.

To me TAS is basically a papered over Collection Division (and is in fact often staffed by Collection Division personnel "on detail to TAS" ).

Remember the person in question is on (documented) Social Security Disability and has virtually no financial resources other than what's left of her SS Disability check and the kindness of her relatives (who will not let her live on the street). Plus the SOL issue.

And though I understand you folks patiently explaining the IRS has only 10 years to collect but has forever to assess (in a provably fraudulent return situation, which for now I must assume is the case for the "old" years") to me it's a distinction without a difference.

Under this probably correct interpretation, they could still try to dig up closed/unpaid fraud cases from 1922, make an assessment in 2011 and then spend the next 10 years (perhaps using Transferee Liability to the heirs) collecting.

The Statutes of Limitation are in place for an obvious reason (not angry at you folks of course, but dismayed at the way the IRS has unrelentingly continued to harass this very ill person). 57% of her Social Security check levied. No Appeal permitted. Ugh.

Thanks again to all

Reply to
Michael

snipped a LOT

Most people, even (sadly) many pros, don't know this.

Interestingly, you can CORRECT a fraudulent return and get the clock ticking for the statute of limitations BUT it requires that the fraudulent return be corrected before the original due date without regard to any extensions. So if you filed a fraudulent return on 02.01 and you amended to correct it before 04.15 the statute would stand. But this happens so rarely as to be virtually nonexistent.

Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

Mr. Utterback and Others:

Thanks again. Didn't mean to vent so much. I think TAS in concept is good but in most recent instances they do nothing to alleviate things (pretty much follow what the Collection Division says).

In this above instance, we are next going to try a low Installment Agreement Request (still more than she can afford). If accepted that's OK, if rejected I still hope to have the Appeal of the rejected Installment Agreement sent through to IRS Appeals.

This would be a new type of appeal (not a CDP) in this matter, with changed circumstances, ongoing documented hardships, etc. Hopefully they won't say "you've already had your Appeal" and again stonewall this woman.

Why won't they let a taxpayer file any type of Appeal DIRECTLY with an Appeals Office, rather than having to fight your way up the food chain (usually beginning with the utterly incompetent/uncaring ACS bureaucracy)? Once a taxpayer makes it to an Appeals Office, usually the result is very fair under the circumstances.

IRS screening of cases pre-Appeals consideration is one thing. Intentionally delaying, obfuscating, acting illegally, making demands ("submit this first" "submit that next" or we won't forward the case at all) is an entire other thing, and undermines basic rights of a taxpayer.

OK enough venting (for today at least).

Reply to
Michael

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