Consent to extend the statute of limitation.

• Author: Marchbein, Joe

Sec. 6501(c) allows the IRS and a taxpayer to consent in writing to extend the statute of limitation to assess tax. Usually the Service makes the request to extend the limitation period because it cannot complete an examination within the normal three-year period for making an assessment against the taxpayer. The statute may be extended on all types of taxes except estate tax (Sec. 6501(c)(4)).

The internal procedures of the IRS can be found in the Internal Revenue Manual (IRM), available to the public at www.irs.gov. IRM Section 4.10.2.2.1 states that a group manager must give approval before an examiner may request a consent from the taxpayer. The Service's policy is that an examiner should secure a consent only in unusual circumstances (Rev. Proc. 57-6). The extension period should be only for the time necessary to complete the examination and administrative actions.

A list of some situations in which an examiner should request a consent is found in IRM Section 25.6.22.2.1. The most common circumstances are if (1) the limitation period will expire within 180 days and the taxpayer is asking that the matter be referred to Appeals or (2) there is not enough time in which to process an agreed case. Typically, the Service considers 120 days as the time frame needed to process an agreed case.

Form 872, Consent to Extend the Time to Assess Tax, is the document usually signed to extend the statute of limitation. The Service may ask a taxpayer to sign Form 872-A, Special Consent to Extend the Time to Assess Tax, which is somewhat of an open-ended consent in that the statute does not expire until 90 days after the IRS or the taxpayer mails Form 872-T, Notice of Termination of Special Consent to Extend the Time to Assess Tax, or the Service issues a statutory notice of deficiency. Versions of the Form 872 series are used in other instances, such as cases involving TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) entities, partnerships, and return preparer penalties.

Taxpayer Options

Besides signing the form, what options are available to a taxpayer when presented with an extension request for an income tax case? The taxpayer can ask for a fixed statute date as opposed to an open-ended one. An open-ended statute of limitation tends to result in an examination being in process for...