Baker Law Firm
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Could you be retroactively liable in a tax dispute?

Most legal claims are subject to deadlines, called statutes of limitations. In practical terms, that means that a plaintiff cannot bring a lawsuit after the applicable period of time has expired.

The Internal Revenue Service is also bound by various limitations periods, which vary based on factors such as whether an individual or entity filed a tax return, and/or the degree to which the return contained errors.

For example, to make assessments, or claims of additional tax being due, the IRS generally has the three years from a tax return’s due date or filing date, whichever is later. To file a claim seeking collection of taxes, the IRS generally has 10 years from the date of the assessment. That same limitations period also applies to administrative collection actions, such as wage garnishment or levies.

Our Connecticut tax law firm pays close attention to new developments in federal and state law, especially any new laws that authorize the IRS or the Connecticut Department of Revenue Services to retroactively tax individuals or entities. One current example is a tax case where the parties have requested a hearing before the United States Supreme Court, Dot Foods Inc. v. Department of Revenue for the State of Washington. The issue is whether it is constitutional for a state government to change a deduction that results in retroactive tax liability; and if yes, how far back that law may reach.

As a law firm that focuses on tax controversies, we rely on these limitations period when offering counsel to our clients. If you receive a letter from the IRS or the state DRS, a tax law firm like ours can help you understand your rights and fight for a favorable outcome.

Source: Accounting Today, “Think last decade's taxes are done? Maybe not,” Stephen L. Carter, May 1, 2017

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