News reports about Geithner, the new Secretary of Treasury nominee, mention that the “statute of limitations” had run out regarding his payment of federal taxes for 2001-2004. I’ve never heard of such a thing, what’s that all about?
Yeah, it’s 3 years generally, but I’ll let a tax person fill in the details.
I think it’s three years for negligent errors, and seven years for fraud.
There is no statute of limitations if you have committed fraud.
Right, the rule is three years in general, seven years for negligent nonreporting of income, no limit for fraud.
So the key determining factor was – was this an honest mistake (i.e. “negligence”)?. Then a statute of limitations comes into play. Was the mistake related to reporting of income or some other issue? Then the statute of limitations is either seven years or three years.
Ed
It’s a six year SOL for Substantial Underpayment, not 7. That’s IRC @ 6501(e), which requires a excess of 25% of the amount of gross income stated in the tax return filed with the IRS.
Geithner is correct on the SOL.
My accountant informs me that there is no statute of limitations on tax liability for the feds. Do people here have cites on the contrary?
Your accountant is wrong. Coming up with a cite directly from IRS publications is difficult, however. As far as I know, there is no single publication that fully states the statute of limitations for individual returns. Nonetheless, a simple Google search for “site:www.irs.gov statute of limitations” proves quite clearly that there is indeed a statute of limitations for individual returns. The only situation that is not subject to a statute of limitations is when a fraudulent return is filed.
Edit: I just found Publication 1035 [PDF FILE] which pretty clearly states the basic statute of limitations for individual returns on its cover.
Side question - isnt there a SOL on how long before the IRS can decide to audit you? And if so, would that not be the effective SOL on the IRS being able to determine if you were fraudulant?
Sorry, I was confused. I think Gus Gusterson is right as to civil liability (i.e., paying the money owed), under IRC 6501. As to criminal liability, though, I believe that the limitations periods are 6 years for fraud, and three years for anything else. IRC 6531.
Yes, it’s the same, 3, 6 and none for normal, understatement, and fraud.
But note that if the IRS doesn’t prove Fraud, they lose the $, so they rarely start an investigation when the 3 years are already up.
I stand corrected on the 6 vs. 7.
Ed