Summary: A statute of limitations restricts the Internal Revenue Service's (IRS) audit and assessment authority to 3 years after a tax return is due or filed, whichever comes later. If more time is needed to resolve a tax examination satisfactorily, the statute period can be extended by written agreement (waiver) between IRS and the taxpayer.
Waivers were requested in about two percent of the many audits conducted by the Atlanta, San Francisco, and Seattle IRS district offices during 9 months selected between October 1974 and October 1975. The reasons given for requesting a waiver do not always explain the underlying cause for not resolving the examination in time. The taxpayer has three options on a waiver--agree to waiver, propose conditions to waiver, or refuse waiver--but he quite often is not informed of alternatives. About 20 percent of interviewed taxpayers who agreed to a waiver indicated that they would have made other decisions had they known the choices; about 24 percent felt pressured into agreeing. The number of waivers could be reduced by amending IRS policies and procedures. IRS could enhance its public image by requesting fewer waivers and providing more complete and consistent information when requests are made.
