Question

A trust, which in fact is a corporation, files a trust return ( Form 1041) for a taxable year instead of corporate tax return (Form 1120). Two years later the entity files the correct return. When does the statue of limitations for assessment commence to run?

Answer 1

Generally speaking, the statute of limitation for the IRS to collect on a tax debt, plus penalties and interest, is 10 years from the date of assessment. Note that this is 10 years from the date of the assessment, not 10 years from the due date of the return. In addition, this 10-year period can be suspended under certain circumstances, including:

• if the taxpayer has filed for bankruptcy protection, plus an additional six months
• if the taxpayer resides outside of the US for at least six months
• if the taxpayer files a request for a collection due process hearing
• if the taxpayer files a claim for innocent spouse relief
• if the taxpayer files for an offer-in compromise (OIC)
• while there is a pending installment agreement request

Finally, the IRS can take action to collect beyond the 10-year limitation period by filing suit to reduce the assessments to judgment.