Statute of Limitations for Tax Crimes

The U.S. government must abide by the statutes of limitations to analyze, review, and resolve tax-related issues. When the statute of limitations expires, the government may no longer act in particular ways, including assessing additional tax or taking a collection action. The statute of limitations is different depending on whether the matter involves an assessment, refund, collection, or criminal tax prosecution. The government generally has a longer time to prosecute for tax crimes.

The statute of limitations for most tax crimes is governed by 26 U.S.C. § 6531. The section states that the period of limitations is generally three years, however, it is six years for the following offenses:

1. Defrauding or attempting to defraud the government;
2. Willfully attempting to evade or defeat any tax or the payment thereof;
3. Willfully aiding or assisting in the preparation or presentation of a fraudulent return, affidavit, claim, or document;
4. Willfully failing to pay any tax or filing any return by the applicable due date;
5. Willfully signing a return or other document under penalties of perjury that he does not believe is true and correct as to every material matter;
6. Willfully providing to the IRS information that he knows is false as to any material matter; and
7. Forcing or threatening a U.S. government employee acting in an official capacity.

The six-year statute of limitations also applies to corrupt acts committed by government employees in connection with the Internal Revenue Code and conspiracy where the object is to attempt to evade the payment of taxes.

Statutory tolling is a legal doctrine that delays the statute of limitations from running in certain circumstances. Under 26 U.S.C. § 6531, if a person who committed a federal tax crime is outside of the United States or is fleeing from justice, the statute of limitations does not run during that time. Because the provision is in the disjunctive, merely being outside of the U.S. on a vacation with no intent of fleeing authorities is enough to toll the statute of limitations.

Under 18 U.S.C. § 3292(a)(1), the government may make an official request for evidence located in a foreign country and suspend the statute of limitations for up to three years if it reasonably appears that such evidence is in the foreign country to the satisfaction of the district court. The statute of limitations resumes running when a dispositive response is received from the foreign government. If the government does not like the dispositive response, it may send another request which can suspend the statute of limitations so long as the total suspended time does not exceed three years.

Because the FBAR requirements are government by Title 31 and not Title 26, different statutes of limitations apply to criminal sanctions related to the FBAR. Under 18 U.S.C. § 3282, the government has five years from the due date to bring a felony charge against a taxpayer for the failure to file an FBAR. However, if the government makes a request for foreign evidence under 18 U.S.C. § 3292(a)(1), the five-year statute of limitations can be suspended for a maximum of three years.

The general rule is that the statute of limitations begins to run from the last affirmative act or when the crime is completed. For example, the statute of limitations for filing a false tax return begins to run on the day the false return is filed. However, if the false return is filed early, then the statute of limitations does not begin to run until the due date (taking into consideration valid extensions). Taxpayers should be aware that the statute of limitations can restart due to subsequent affirmative acts. For example, if a false return is filed on January 1 of Year 1, and a false statement is made to the IRS on December 31 of Year 5, the six-year statute of limitations begins to run anew on December 31 of Year 5.

*Note that, in an unpublished opinion, the Ninth Circuit Court of Appeals held that the crime of evasion of tax assessment was complete when the taxpayer willfully filed his false tax returns. The Court, therefore, held that the government was barred from prosecuting the crime of evasion because the indictment had been brought more than six years after the taxpayer willfully filed his tax return. (United States v. Galloway, 2020 U.S. App. LEXIS 3976 (9th Cir. 2020) (unpublished)).

Many taxpayers face issues related to the statute of limitations for assessment, refund, collection, or criminal tax prosecution. Our Los Angeles attorneys can provide knowledgeable counsel and representation, whether you are dealing with civil or criminal tax matters. Mr. Ben-Cohen is an attorney, a CPA, and a Board Certified Taxation Law Specialist who can provide you sophisticated legal advice regarding your statute of limitations issue. Contact us at (310) 272-7600 or complete our online form to set up an appointment with a criminal tax attorney or seek representation in another matter related to your tax obligations. We assist taxpayers in Santa Monica, Malibu, Beverly Hills, Burbank, Pasadena, Sherman Oaks, Venice, and West Hollywood, as well as other areas of Los Angeles County.