There are several key factors to take into consideration when determining the statute of limitations. In some cases, when the IRS issues a summons to a third party, the statute of limitations may be extended.
Determination of a due date of a tax return, including extensions, is the first step. Different types of entities have different filing deadlines and, under certain circumstances, two entities of the same type may have different due dates for filing their tax returns.
In general, a taxpayer is not considered to have filed a tax return (which begins the period of limitations on assessment) until the taxpayer files a valid tax return. See IRM 18.104.22.168.14. In general, a return is filed on the date that it is received at the place designated for filing by the Service. While the determination of the received date is one of the most important factors, it does not necessarily establish the filing date. The filing date is established after applying the relevant IRC sections.
As a general rule, tax on an income tax return must be assessed within three years of the filing of that tax return. There are, however, circumstances where the general rule does not apply, such as:
No return filed – IRC 6501(c)(3)
Receipt of certain amended returns – IRC 6501(c)(7)
Extension of statute of limitations by agreement – IRC 6501(c)(4)
Waiver of statute of limitations defense on a closing agreement – IRC 6213(d) and 7121
False or fraudulent tax return – IRC 6501(c)(1) and 6501(c)(2)
Substantial omission of gross income – IRC 6501(e)(1)(A)(i)
Failure to report more than $5,000 in income attributable to specified foreign financial assets – IRC 6501(e)(1)(A)(ii)
Failure to furnish information regarding foreign transfers – IRC 6501(c)(8)
IRC Section 7602 provides the IRS with the authority to issues summonses:
“(a)Authority to summon, etc. For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary is authorized—(1)To examine any books, papers, records, or other data which may be relevant or material to such inquiry;(2)To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary may deem proper, to appear before the Secretary at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and(3)To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.”
Under IRC 7609(e)(2), the statute of limitations on assessment in any case in which a third party summons was served, the statute of limitations will begin to toll six months after the service of the summons if the summons remains unresolved as to “any person with respect to whose liability the summons is issued.” Therefore, if the IRS issues a John Doe summons,
the statute of limitations on assessing tax on any member of the John Doe class is suspended starting six months from service of the summons and ending on the date of final resolution of the summons.
If you have received an IRS Summons, contact a tax attorney to discuss what it means and how to respond to the IRS. If you are under and IRS audit, you may receive an IRS Summons. On the other hand, the IRS issues third party summonses to individuals or businesses who are not under examination.