Extending the Tax Assessment Period:

Why, How Often, and What Improvements Can Be Made

GGD-76-108: Published: Mar 28, 1977. Publicly Released: Mar 28, 1977.

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A statute of limitations restricts the Internal Revenue Service's (IRS) audit and assessment authority to 3 years after a tax return is due or filed, whichever comes later. If more time is needed to resolve a tax examination satisfactorily, the statute period can be extended by written agreement (waiver) between IRS and the taxpayer.

Waivers were requested in about two percent of the many audits conducted by the Atlanta, San Francisco, and Seattle IRS district offices during 9 months selected between October 1974 and October 1975. The reasons given for requesting a waiver do not always explain the underlying cause for not resolving the examination in time. The taxpayer has three options on a waiver--agree to waiver, propose conditions to waiver, or refuse waiver--but he quite often is not informed of alternatives. About 20 percent of interviewed taxpayers who agreed to a waiver indicated that they would have made other decisions had they known the choices; about 24 percent felt pressured into agreeing. The number of waivers could be reduced by amending IRS policies and procedures. IRS could enhance its public image by requesting fewer waivers and providing more complete and consistent information when requests are made.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: Taxpayers should be provided with complete and consistent explanations of their rights and options concerning waivers. Taxpayers should be permitted greater leeway in proposing waiver conditions and their conditions should be more readily accepted. Priority handling techniques should be applied for cases nearing expiration of the statutory period. A waiver request should be made only after priority processing results indicate the need for more time. The use of open-ended waivers should be expanded. A statement should be added to IRS request form for fixed-period waivers noting that the period will end on the agreed upon date or after assessment, whichever comes first.

    Agency Affected:

 

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