An “assessment” is the timely recording of a taxpayer’s liability in accordance with IRS rules.1 Generally, assessments must be made by the IRS within 3 years after the filing of a return.2 The period is extended to 6 years if a return omitted more than 25% of the taxpayer’s gross income.3 The 3- or 6-year limit on assessment is referred to as the Assessment Statute Expiration Date (ASED). This period may be waived by the taxpayer. The assessment period does not begin if a tax return was fraudulent or not filed.4 There is no statute of limitation for assessment of a fraudulent return, and the subsequent filing of a non-fraudulent return does not avoid the unlimited statute of limitation for the original return.5 However, when the original fraud consists of not filing a return, a subsequent return triggers the 3-year limit on assessment.6
The taxpayer has a right to the IRS’s record of assessment. Transcripts of a taxpayer’s records may be ordered by tax professionals from the Practitioner’s Priority Service at (866) 860-4259. These transcripts can also be obtained by tax attorneys with access to the IRS online database through E-services.
There are three different types of transcripts that are useful to a tax attorney. The first is the “account” transcript which will state the amount of tax liability and provide a timeline of actions taken by the taxpayer and the IRS for that tax year; it will also enable you to determine the expiration date for collections.7 The second is the “wage and income” transcript which show all information reported by third parties, such as W-2 and 1099 information, mortgage interest payments, IRA withdrawals, and cancellation of debt. The third transcript is the “tax return” transcript which provides a summary of the original tax return filed by the taxpayer. If the return is amended by the taxpayer or changed by the IRS, however, the “tax return” transcript will not be updated to show those changes. You will need to get that information from the client or by calling the IRS.
- 1I.R.C. § 6203.
- 2I.R.C. § 6501.
- 3I.R.C. § 6501(e)(1).
- 4I.R.C. § 6501(c).
- 5I.R.C. § 6501(c)(1)–(2); Badaracco v. Comm’r, 464 U.S. 386 (1984). A preparer’s fraud can extend the statute of limitations. See Allen v. Comm’r, 128 T.C. 37 (2007).
- 6I.R.C. § 6501(c)(3); IRS Nat’l Office Field Serv. Advice, Assistant Chief Counsel Memorandum, No. 200051040 (Dec. 22, 2000).
- 7For guidance in spotting statute of limitations issues, see Am. Bar Ass’n, Effectively Representing Your Client before the IRS ch. 17 (8th ed. 2021). The IRS account transcripts will use code 150 to designate the assessment date. See Transaction Codes, Pocket Guide, IRS Document 11734 (Rev. 5-2012).