IRS Form 872 – Statute of Limitations

What is IRS Form 872?

Let’s say you’ve filed back taxes for years and received a request in the mail from the IRS for additional time to process and review your returns. The form issued to you is IRS Form 872- Consent to Extend Time to Assess Tax, one of the many examples of an IRS statute of limitations. This statute of limitations is designed to ensure the timely assessment and examination of tax returns. U.S. law grants the IRS the authority to extend the time in which they’re allotted to complete a return, however, the taxpayer must consent to the requested extension.

IRS Form 872 Instructions

Form 872 is fortunately very straightforward, simply requesting your taxpayer identification number (TIN), name, address, and signature. The form will reveal the federal tax due, an expiration date, and your rights as a taxpayer. As with anything requiring your signature, you should carefully assess the terms and conditions you are agreeing to before signing and sending.

Because there are so many different types of tax-filing statuses and forms, it’s important to understand how your particular situation should be handled when dealing with IRS Form 872. We’ve broken it down simply by status for you to best assess your tax responsibilities:

For individuals: Simply sign the signature line.

For joint-filers: Both husband and wife must sign the signature line.

For decedents: Form 872 should be signed by the executor, administrator, or personal representative of the decedent’s estate.

For corporations: Form 872 should be signed with the corporate name, followed by the signature of either the president, vice-president, treasurer, assistant-treasurer, chief accounting officer, or any other officer legally authorized to do so. It does not matter whether or not the signee of Form 872 signed the original return.

IRS Form 872: What Are My Rights as a Taxpayer?

According to the IRS “You have the right to refuse to extend the period of limitations or limit this extension to a mutually agreed-upon issue(s) or mutually agreed-upon period of time.” IRS Publication 1035 plainly states that should you refuse to sign your consent, the IRS will “ take steps that will allow [them] to assess any tax [they] determine to be due.”

The first step taken after your refusal is the issuance of a Notice of Deficiency or a Notice of Employment Tax Determination Under IRC § 7436. Neither of these notices require that make an immediate payment or take your case to court, rather it gives you 90 days to either agree with the tax liability or deficiency, or to file a petition with U.S. Tax Court for a reassessment of the proposed liability or deficiency.

What Happens if I Take My Case to Court?

In the event that you decide to take your case to the United States Tax Court, you will be granted the opportunity for a pretrial settlement. If an agreement cannot be reached during the pretrial, the case will be escalated into a court hearing.

In a recent court case, an auditor received a Form 872 from a taxpayer that was incorrectly filled in with the wrong tax year. A notice of proposed assessment was issued by the IRS, but was done beyond the original three-year statute but prior to the expiration date listed on Form 872. That taxpayer tried to claim that the proposed assessment was barred by the statute of limitations since the form did not have the correct subject tax year.

The court ruled in favor of the government, but it did indicate that the taxpayer, as well as the IRS, made the mistake in that they both thought that that Form 872 applied to that tax year under audit. The Tax Court reformed the Form 872 to apply to the correct year that the IRS was intending to audit.

The Tax Court hypothesized that a different result could have occurred if the taxpayer noticed the IRS’ mistake on Form 872 but signed it anyway, and could somehow prove that was the case.

IRS Form 872: Let Us Help

Do you have any additional questions relating to the IRS Statute of Limitations, IRS Form 872, and how either could possibly affect you? Contact Community Tax to find out how we can help you with any and all of your questions. Call us at (844) 255-1196 to speak with a professional today.