The term "statute of limitations" in tax matters refers to the laws that limit the period of time for performing a certain action, such as a taxpayer filing a return to obtain a refund or the Tax Commission assessing additional tax. It is the specified timeframe in which the taxpayer or the government is allowed to initiate legal action. Once the statute of limitations has expired, then no matter how much merit a case may have it is generally not possible to perform certain actions.
Statutes of limitations are intended to encourage the resolution of legal claims within a reasonable amount of time.
The specified period of time in a statute of limitations is set by the Legislature.
Things to Consider
Here are some specific points concerning statutes of limitations:
- A Utah overpayment of personal income taxes may only be claimed if an original or amended return is filed within three years from the original filing due date plus the extension period, or two years from the date the tax was paid, whichever is later as indicated in Utah Code Utah Code §59-1-1410. See Utah Code §59-10-529 for amended returns based on net operating losses and changes to federal income tax returns.
- The Tax Commission may only begin an audit of a Utah individual income tax return within three years of the later of the due date or the date filed, unless a substantial error is identified or fraud is involved.
- After the expiration of the statute of limitations for issuing a refund, the law not only prevents the issuance of a refund check, it also prevents any credits, including overpayments of withholding or prepaid taxes, from being applied to other tax years that are underpaid.
- The statute of limitations for the Tax Commission to assess and collect any outstanding balances does not start until a return has been filed. In other words, there is no statute of limitations for assessing and collecting the tax if no return has been filed.
Extending the Statute of Limitations
The statute of limitations for refunds and audits may be extended if both the taxpayer and the Tax Commission agree to the extension of time. For example, if an audit of your tax return is for an older year, you may be requested to extend the statute of limitations in order to allow additional time to provide documentation, complete the audit, or file an appeal.
If the statute of limitations is about to expire and you do not agree to an extension of time, the audit will be concluded based upon the information currently available. This would prevent the auditor from considering additional adjustments before the normal statue expires, such as deductions that could lower your tax due.
Use form TC-98, Application to Extend Time to File a Claim for Refund, to request an extension for the overpayment statute of limitations.
What if I have not filed returns for several years?
If you were required to file a return for previous year(s) and didn't, you should do so. The statute of limitations for the Tax Commission to audit you for those taxes does not end if you do not file the required returns.
You may print prior year's tax returns and their instructions from our website or call 801-297-2200 or 1-800-662-4335 to request prior year tax booklets.
You may qualify to file prior year returns under the Fresh Start program. If you expect to owe both state and federal taxes, the Tax Commission and IRS will work together to help you work out a payment plan. Under certain circumstances, even if you do not qualify for the Fresh Start program, penalties may be waived. See Publication 17, Waivers and Reasonable Cause for more information.