Consent to Extend the Time to Assess Tax

The Internal Revenue Service (IRS) typically has three years from the date you file your tax return to audit it and assess any additional taxes owed. This three-year period, known as the “statute of limitations,” protects taxpayers from indefinite uncertainty regarding their tax liabilities. After this period, the IRS generally cannot challenge your filed return, unless there are cases of fraud or if a return was never filed.

However, tax returns can sometimes involve complex deductions, credits, or other issues that necessitate a longer review period. In such cases, the IRS may request your agreement to extend the timeline for assessment through a formal document called Form 872, known as the “Consent to Extend the Time to Assess Tax.” By signing this consent, you effectively pause the standard three-year audit clock, giving the IRS additional time—ranging from a few months to several years—to conduct a thorough review.

This consent is crucial because it helps prevent rushed audits and potential disputes caused by the IRS running out of time to complete an assessment. It also provides legal protection for the IRS to continue investigations beyond the usual deadlines without risking the statute of limitations expiring.

Form 872 can specify either a limited extension period or remain open-ended until certain tax matters are resolved. It acts as a pause button on the audit timeline rather than an indefinite extension, ensuring both parties understand the timeframe involved.

Both individual taxpayers and businesses may be asked to sign this consent for various types of taxes, including federal income tax, estate tax, and gift tax. Not signing the form may limit the IRS’s ability to assess additional taxes once the statute of limitations expires, but it also means the IRS must complete its audit within the original period.

Here are some practical examples:

• If you filed a 2020 tax return in April 2021, the IRS would have until April 2024 to assess additional tax. However, if the IRS identifies complex issues such as unusual business deductions, they might send you Form 872 to extend the deadline to April 2025.
• During an ongoing audit, before the three-year limit expires, the IRS might ask you to consent to an extension to prevent the audit timeline from expiring mid-review.

When considering whether to sign Form 872, review the extension period carefully and ask why more time is required. You have the right to negotiate the length or scope of the extension and set conditions to limit the IRS’s access. Always keep a signed copy for your records. If uncertain, consulting a tax professional is advisable to understand the implications fully.

Common misconceptions about this consent include:

• Giving consent does not mean you owe more taxes; it only allows more time for the IRS to review.
• You are not legally required to sign the form, although refusal could restrict the audit process.
• The IRS must have your written consent through a signed form, not just verbal agreement.

For more detailed information on related topics, see our articles on Statute of Limitations and IRS Audit.

Summary Table

Sources

• IRS, “Instructions for Form 872,” available at IRS.gov
• IRS, “Understanding the Statute of Limitations,” IRS.gov
• Investopedia, “Statute of Limitations for Taxes” (2024) Investopedia