Statue of Limitation For Tax Claims

Statute of Limitations – Federal Taxes

IRS’ ability to collect any federal tax expires 10 years after it assesses the tax, unless it commences a lawsuit to collect the tax, obtains a favorable court judgment and periodically renews the judgment. The 10-year statute of limitations also applies to tax liens. A federal tax lien will expire 10 years after the tax is assessed, unless IRS begins a lawsuit to collect the tax, obtains a favorable court judgment, and periodically renews the judgment. The 10-year time period begins to run on the date IRS assesses the tax, not on the date it files a tax lien. A bankruptcy filing is unnecessary if the taxpayer’s primary goal is to avoid payment of a federal tax assessed more than 10 years ago.

Statute of Limitations – Texas State Taxes

Texas state taxes (sales, property and unemployment) can not be assessed more than four years after the tax is due and payable. The tax can not be collected if the Texas government office does not assess the tax within four years.

The State of Texas must file suit to collect the tax within three years after the later of the date the tax became due and payable or the tax lien was last recorded. The tax becomes uncollectible and the tax lien will expire if the state does not file suit to collect the tax before expiration of the three-year time period.

There are several exceptions to the three-year statute of limitations. The statute of limitations does not apply if:

  • The tax imposed relates to a fraudulent tax return or the taxpayer is guilty of tax fraud
  • The Taxpayer never filed a required tax return for the tax in question
  • The tax return contains a gross error. A gross error is any error which results in an increase of 25 percent or more in the tax due.

The three year statute of limitations is suspended during any time period that (1) any bankruptcy case is pending; a tax payment has been made under protest; or (3) any lawsuit or administrative proceeding to determine the amount of the tax due.