Now and then a post comes up here that mentions the
taxpayer agreed to extend the statute of limitations
for the IRS.
Now I can understand how an unadvised person might do
this in the face of (potentially illegitimate) IRS
But that aside, why would one ever agreed to extend
the SOL, especially if it were about to run out? As
part of a deal where the IRS concedes on some other
Rich Carreiro email@example.com
I recall a collection case you might say involved a concession. An
elderly couple owed a few thousand and the only available asset they
had was their free and clear home. They couldn't afford to make
mortgage payments even if someone would have made the loan. (This was
before anyone heard of reverse mortgages.) I told them they could
stay in the house until they died as long as they extended the
statute. I had more trouble selling that one inside than to the
On the assessment side, wouldn't the IRS just go ahead and start the
process if the taxpayer won't extend?
Great question - I wish I had a great answer. I can tell the reasons I've
seen and heard of -
1 - taxpayer wanted to buy time;
2 - tax preparer wanted to buy time - I did this one myself years back. I
was going through my third bought with cancer and chemo and was nearly dead
on my feet. I did NOT have time to deal with the case properly (it was a
referred case, not my original client). When I told the client I couldn't
handle the case timely they agreed to extend the statute (more on this
3 - taxpayer was scared
4 - preparer was scared - no legitimate reason for this one, but it happens.
5 - third party trap - I've only HEARD of this one, I cannot confirm or deny
that its legitimate - taxpayers were limited partners in a California real
estate development partnership that was under exam by the IRS. The tax
matters partner agreed to extend the statute of limitations on the 1065 and
recommended that all the partners agree as well.
As a side note, while you didn't ask I still feel compelled to mention this
(and its an add-on to my item #2) - the consent to extend the statute of
limitations CAN BE revoked using form 872-T (if I recall correctly). This
allows you to agree to extend the statute temporarily, then revoke that
agreement later. It does effectively extend the statute but it gives you an
opportunity to limit the exposure and close the door.
Gene E. Utterback, EA, RFC, ABA