IRS OVDP – Statute of Limitations

Under the normal rules, a three year statute of limitations applies for the IRS to assess tax penalty and interest. The three year statute of limitations may be extended:

1. To six years, if the IRS can prove a substantial omission of gross income;

2. If there was a failure to file information returns; e.g., Form 3520, 5471 or 8938, the statute of limitations will not have begun to run;

3. If the IRS can prove fraud, there is no statute of limitations for assessing tax;

4. For FBAR penalties, the statute of limitations is six years from the date of the violation, which would be the date that an unfiled FBAR was due to have been filed (31 USC Sec. 5321(b)(1). See IRS/OVDI (2012) FAQ No. 42);

5. As part of the IRS/OVDI (2012), the U.S. taxpayer is required to extend the period of time to assess tax (including tax and penalties) and to assess FBAR penalties. (See IRS/OVDI (2012) FAQ No. 43).

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