Statute of Limitations
The time limit within which the IRS may assess additional tax or a taxpayer may claim a refund.
REG loves to feed you a fact pattern and ask “by what date must the IRS assess?” The answer hinges on which clock applies: the general 3-year period (§6501(a)), the 6-year period when more than 25% of gross income is omitted (the examTip’s “substantial omission,” §6501(e)), or no limit at all for a fraudulent return or no return filed (§6501(c)). The classic tell is a dollar figure designed to test the 25% threshold—measured against gross income stated on the return. The trap: overstated deductions don’t trigger the 6-year rule, only omitted gross income does (though an overstated basis that understates gain does count since 2015). For the taxpayer side, the refund claim deadline is the later of 3 years from filing or 2 years from payment (§6511); students routinely confuse it with the assessment period.
Don’t confuse any of this with Circular 230, which governs practitioner ethics and duties (diligence, conflicts), not when tax can be assessed—a different chapter entirely. Memory hook: “3 normal, 6 if you hide a quarter, forever if you cheat.”
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