Statute of Limitations on Tax Fraud

Statute of Limitations on Tax Fraud – When Does the IRS Clock Actually Expire?

Heres what most people dont understand about tax fraud statutes of limitations: there isnt just one clock running. There are at least four. And some of them never stop.

The criminal prosecution clock gives the government 6 years to charge you. The civil assessment clock – for fraud – runs forever. The collection clock gives the IRS 10 years after assessment. And the refund clock gives you just 3 years to claim money back. Miss any of these deadlines, and the consequences are permanent.

Most people focus on the 6-year criminal statute and think theyre safe after that. They’re not. The IRS can still assess civil fraud penalties decades later. They can still collect on fraud-related debt forever. The criminal exposure ends, but the financial exposure never does.

Welcome to Spodek Law Group. Our goal is to explain every statute of limitations that applies to tax fraud – criminal, civil, and collection – so you understand exactly how long your exposure lasts. Todd Spodek has represented clients who thought they were protected by time limits, only to discover the government still had options. Understanding these clocks could change everything about how you approach your situation.

If you’re facing a tax fraud investigation – or worried about past conduct – call us at 212-300-5196 immediately. Some of these clocks are still running.

The Multiple Clocks Running Against You

Understanding tax fraud time limits requires understanding that different rules apply to different aspects of your case.

The Criminal Prosecution Clock (6 Years)

Under 26 USC § 6531, the government has 6 years to bring criminal charges for tax evasion, filing false returns, or willful failure to file. After 6 years from the offense, they cant prosecute you criminally.

The Civil Assessment Clock (Forever for Fraud)

Under 26 USC § 6501(c), if you filed a fraudulent return with intent to evade tax, there is NO statute of limitations. The IRS can assess additional taxes and civil fraud penalties at any time. Forever.

The Collection Clock (10 Years, With Exceptions)

After the IRS assesses a tax, they generally have 10 years to collect it. This is called the Collection Statute Expiration Date (CSED). But for tax debt arising from fraud convictions, the collection period never expires.

The Refund Clock (3 Years)

If you overpaid taxes, you have just 3 years from the due date to claim a refund. Miss this window, and the government keeps your money.

The interplay between these clocks creates traps that catch even sophisticated taxpayers.

Criminal Prosecution – The 6-Year Window

The criminal statute of limitations for tax crimes is governed by 26 USC § 6531. Most tax offenses have a 3-year statute, but serious crimes get 6 years.

Offenses with 6-Year Statutes:

• Tax evasion (26 USC § 7201)
• Willfully filing false returns (26 USC § 7206)
• Willful failure to file (26 USC § 7203)
• Conspiracy to defraud the United States
• Aiding and abetting false returns

When Does the Clock Start?

The 6-year period begins when the offense is “committed.” For filing a false return, that’s the filing date. For failure to file, it’s the due date of the return or the last willful act associated with avoiding payment.

The Vacation That Extended Your Exposure

Heres something that catches people completely off guard. The statute of limitations is tolled – stopped – when youre outside the United States.

You took a two-week vacation to Europe. You weren’t fleeing anything. You had no idea you were under investigation. But that time doesnt count toward your 6-year protection. Every day you spend outside the US – for any reason – stops the clock.

Under 26 USC § 6531, “the time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States… shall not be taken as any part of the time limited by law.”

Your beach vacation extended the prosecution window. Your business trip bought the government more time. The statute requires neither intent to flee nor knowledge of investigation. Simply being abroad is enough.

If youve spent six continuous months abroad, the entire time is excluded. Add up all your international travel over the past six years. That’s how much extra time the government has.

Civil Assessment – The Clock That Never Starts

Criminal prosecution has limits. Civil assessment does not – at least not for fraud.

Under 26 USC § 6501, the IRS normally has 3 years from when you file to assess additional taxes. If you substantially understate income (by more than 25%), they get 6 years.

But for fraud? Section 6501(c)(1) provides: “In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed… at any time.”

At any time. Forever. There is no limit.

This means the IRS can audit your 2010 return in 2030 if they can prove fraud. They can go back to 1995 if they find fraudulent intent. The 20-year-old conduct you thought was buried can surface at any moment.

The Unfiled Return Problem

What if you didnt file a return at all? Section 6501(c)(3) provides: “In the case of a failure to file a return, the tax may be assessed… at any time.”

Again – forever.

Heres the irony. The person who filed a fraudulent return gets at least some procedural protections. The person who didnt file at all gets none. The statute of limitations protects people who file – even if they filed falsely – more than it protects people who simply didnt file.

Non-action is punished more than fraudulent action, at least in terms of time limits.

The Difference Between Criminal and Civil

You might escape criminal prosecution after 6 years. But the IRS can still assess the civil fraud penalty – 75% of the underpayment – decades later. They can still pursue the taxes you owe, plus interest compounding since the original due date.

The criminal exposure ends. The financial exposure never does.

How the Government Extends Its Time

The 6-year criminal statute isnt as fixed as it appears. The government has multiple tools to extend its prosecution window.

Tolling for Being Outside the US

As discussed, any time spent abroad stops the clock. This includes:

• Vacations
• Business travel
• Extended stays for any reason
• Even brief trips

The government doesnt need to prove you were fleeing. Simply being outside US jurisdiction is enough.

Tolling for Fugitive Status

Under 18 USC § 3290, no statute of limitations extends to a person “fleeing from justice.” Courts are split on whether this requires intent to flee, but the safest assumption is that any absence from the jurisdiction after you know about an investigation could be deemed flight.

Foreign Evidence Requests

Under 18 USC § 3292, if the government requests evidence from a foreign country, the statute of limitations can be suspended for up to 3 years.

Your offshore accounts dont just create criminal exposure. The investigation of those accounts can extend the time the government has to prosecute you. The evidence hunt itself buys more time.

This creates a strategic advantage for prosecutors. They can identify foreign accounts, request records through international channels, and effectively add years to their prosecution window.

The Sealed Indictment

If prosecutors obtain an indictment before the 6-year deadline but seal it, the statute is satisfied even if you dont learn about the charges until later. The government can investigate for 5 years, indict in year 6, and arrest you in year 8.

The Strategic Advantage

Prosecutors understand these tolling provisions. They use them strategically. If theyre investigating someone with offshore accounts, they know they can request foreign records and buy 3 years. If the target travels internationally for business, they track those trips.

The government keeps detailed records of your travel. Passport control notes every entry and exit. Airlines keep manifests. The IRS can reconstruct your international travel history and calculate exactly how much extra time they have.

What looks like a fixed 6-year deadline is actually elastic. The government stretches it through legitimate procedural tools that most taxpayers dont know exist.

The Discovery That Changes Everything

Some clients come to us believing the statute has passed. They did the math. The conduct was 7 years ago. They think theyre safe.

Then we ask about travel. Two weeks in Mexico. A business conference in London. A cruise through the Caribbean. Each trip stops the clock. Suddenly the 6-year statute hasnt expired – its still running.

The passage of time alone doesnt protect you. The absence of tolling events protects you. These are different things.

The 10-Year Collection Statute and Its Fraud Exception

After the IRS assesses a tax liability, they have 10 years to collect it. This is the Collection Statute Expiration Date – CSED.

How the 10-Year Clock Works

The clock starts on the assessment date, not the filing date. Assessment typically occurs within a few weeks of filing, but can occur years later after an audit.

Each assessment has its own CSED. If you have multiple tax years at issue, each year has its own 10-year window.

After 10 years, the debt expires. The IRS stops collection efforts. Related liens dissolve. You no longer owe the money.

What Tolls the Collection Clock

Several events can stop or extend the CSED:

• Bankruptcy: The clock stops from petition to discharge, plus 6 months
• Offer in Compromise: The clock stops while the IRS considers your offer, plus 30 days if rejected
• Installment Agreement: The clock stops while your request is pending
• Litigation: Court challenges can toll the statute
• Military Service: Active duty overseas tolls collection

Heres the trap. Every attempt to resolve your debt can extend how long the IRS can collect it. File for an installment agreement, and the clock stops while they consider it. Get rejected, and the clock stays stopped another 30 days. Years of “protection” can evaporate through administrative actions designed to help you.

The Fraud Exception – Forever

For most tax debt, the 10-year rule applies. But if your debt arises from a fraud conviction, there is no collection limit.

Tax debt from fraud conviction never expires.

The criminal case creates a civil debt that follows you forever. Restitution ordered in the criminal case becomes an assessment. That assessment – because it derives from fraud – has no expiration.

The worse the offense, the longer the collection period. All the way to infinity.

The IRS Wont Tell You When It Expires

The IRS doesnt notify you when your CSED passes. They’ll pursue you for 9 years and 11 months, then quietly stop. You have to track the date yourself.

The agency that sends notices about everything sends no notice about this.

The Bankruptcy Trap

Many people file bankruptcy hoping to discharge their tax debt. Heres what happens instead.

Tax debt can only be discharged in bankruptcy under very limited conditions. The tax must be at least 3 years old. You must have filed a return at least 2 years before bankruptcy. The IRS must have assessed the tax at least 240 days before bankruptcy.

But fraud destroys all of these protections. Tax debt arising from fraud is NEVER dischargeable in bankruptcy. The protection you thought Chapter 7 or Chapter 13 would provide doesnt exist.

And during your bankruptcy, the collection statute is tolled. You emerge from bankruptcy still owing the same fraud-related debt – and the IRS now has even more time to collect it.

The bankruptcy that was supposed to save you actually extended your exposure.

The Estate Liability Problem

Tax fraud debt survives your death. Your estate remains liable. The IRS can pursue collection against your heirs through inherited assets.

The debt you hoped to outlive will outlive you instead.

What This Means For Your Case

Understanding the statute of limitations requires understanding your specific situation.

If You’re Under Investigation Now

The 6-year criminal clock may still be running. Your travel abroad may have extended it. Foreign evidence requests may have tolled it. Dont assume the passage of time protects you until a lawyer has analyzed your specific timeline.

If You Haven’t Been Contacted in Years

Criminal exposure likely ends after 6 years – but only if you havent traveled abroad, and only if no tolling events occurred. Civil exposure never ends. The IRS could still audit and assess penalties for returns filed decades ago.

If You’re Considering Voluntary Disclosure

Come forward voluntarily, and the IRS typically only requires you to file 6 years of returns. Your exposure is capped. Get caught instead, and they can go back forever for civil penalties.

Honesty limits your exposure. Dishonesty extends it indefinitely.

If You Have Outstanding Tax Debt

The 10-year CSED might be approaching, but tolling events could have extended it. A bankruptcy filing that seemed to help may have actually bought the IRS more time. Calculate carefully before assuming your debt is about to expire.

The Forever Cascade

For the most serious cases, heres the cascade:

Tax fraud committed → Criminal prosecution within 6 years → Conviction → Restitution ordered → Fraud-based assessment → Collection period unlimited → Garnishment, liens, levies for life → No bankruptcy discharge → Die owing the debt → Estate still liable

The debt follows you beyond the grave.

The Timing Calculation Mistake

Many people make a simple but catastrophic error. They calculate 6 years from the filing date and assume theyre safe. But the calculation is more complex.

Did you travel abroad at all during those 6 years? Add those days. Did the government request foreign evidence? Add up to 3 years. Did you move states and become difficult to locate? Prosecutors might argue fugitive tolling.

The simple 6-year calculation almost never tells the full story. And mistakes in this calculation lead to false security.

We’ve seen clients who believed the statute had expired – and were devastated to learn they were wrong. They made decisions based on false assumptions. They spoke to investigators when they should have remained silent. They declined to pursue voluntary disclosure when it could have helped. All because they miscalculated their actual exposure window.

The statute of limitations is protection only if you calculate it correctly.

Calculating Your Actual Exposure

Determining your statute of limitations exposure requires precision.

Step 1: Identify the Offense Date

For filing a false return, this is the filing date. For failure to file, this is the due date (usually April 15). For tax evasion, this might be the last affirmative act of evasion.

Step 2: Add 6 Years

For most serious tax crimes, the statute is 6 years.

Step 3: Add Time Spent Abroad

Every day outside the US stops the clock. Add these days to your calculation.

Step 4: Consider Other Tolling Events

Foreign evidence requests? Add up to 3 years. Fugitive status? Unlimited tolling.

Step 5: Check for Sealed Indictments

You wont know about sealed indictments, but their existence could mean the government met the deadline before you thought they did.

For civil exposure, the calculation is simpler: if fraud was involved, there is no limit.

The Interest Accumulation During This Time

While all of these statutes are running, interest continues to accrue. The IRS charges interest from the original due date of the return – not from when they discovered the fraud.

A fraud from 2015 that gets assessed in 2025 includes 10 years of compounded interest. At roughly 8% annually (the rate varies), your $100,000 tax debt becomes nearly $200,000 from interest alone.

The statute of limitations may protect you from prosecution. It doesnt protect you from compound interest during the assessment period.

What You Should Do Now

If youre concerned about tax fraud statutes of limitations:

Do not assume youre protected. The interplay of criminal, civil, and collection statutes creates more exposure than most people realize.

Document your travel. Every day abroad affects your criminal statute calculation.

Calculate your CSED. If you have outstanding tax debt, know exactly when collection authority expires – and what events may have extended it.

Consult a criminal tax attorney. Before making assumptions about what’s expired and what hasn’t, get professional analysis of your specific timeline.

Spodek Law Group is located in the Woolworth Building at 233 Broadway in Manhattan. We handle federal criminal tax defense nationwide, including statute of limitations analysis. If you’re unsure whether the government can still prosecute, still assess penalties, or still collect – call us at 212-300-5196.

Todd Spodek has represented clients who believed they were protected by time limits. Some were right. Some discovered the clock had been tolled by events they didnt know counted. Some learned that civil exposure continues forever, even when criminal exposure ends. The analysis matters.

The statute of limitations on tax fraud isnt a single deadline. Its a complex system of multiple clocks, tolling provisions, and exceptions. Understanding exactly where you stand could change everything about your strategy.

Call us today. The consultation is free. Misunderstanding the statute of limitations could cost you everything.