No, unless some circumstance occurred that extended or suspended the running of the statute of limitation (SOL) for the IRS to assess additional tax. That SOL also prevents assessment of any penalty that would be connected with that tax, and there is no interest to pay without tax or penalty assessed. The most common circumstances that extend the SOL for assessment of additional tax once a return has been filed are bankruptcy, extended absence outside the U.S., undereporting of your income by 25% or more, failure to report certain foreign income and investments, and fraud. If nothing like that has occurred the IRS is barred by law from assessing the penalty and interest and, except in uncommon circumstances, no point in you filing the return. However, if your state imposes and an income tax that depends on what you reported as income on your federal return to compute then it is possible that the state may still assess additional tax, penalty, and interest. The state would first have to know about it, of course, and by far the most likely way that would occur is in matching return information with the IRS.
Is the IRS aware that you neglected to include that income on your 2020 return or did you get reminded via some other means? The SOL would have been extended if the IRS notified you of the discrepancy prior to the SOL expiring.
No, a simple notification by the IRS does not extend the SOL. This is why when the SOL is getting close to expiring IRS examiners and agents either get the taxpayer to execute a waiver extending the statute of limitations, get statutory notice of defiency out well before 90 days before the SOL expires, or, if they can justify it, make a prompt assessment of the tax before the SOL expires. I remember quite well from my time at IRS the scramble of examiners and agents at the end of the year working to resolve any cases with SOL dates coming up the following April because that SOL is a hard deadline and they get significantly dinged in their performance appraisials if they let a SOL expire in their inventory. Simply issuing a notice would not get them out of that problem.
Thanks for that info. If that is the case, then we have had a few cases where IRS agents are trying to get around that. We had several CP-2000s for 2020 that came in just before April 15th. We even had a few that came in after April 15th. You don't know of any COVID provisions that temporarily changed that rule do you?
Not correct. It might be a 6 year SOL if it was a substantial understatement, which would be dependent on facts not presented here. Otherwise, any deficiency notice now would be facially invalid and would be effectively voided if challenged in court.
You need to look at the date the return(s) in question were filed. §6501 period for assessment begins on the later of the due date of the return or the date it was filed. The due date absent extension for 2020 was still 4/15/2021. The disaster postponement doesn't change that. An extension of time to file gave the taxpayer until 10/15/21 to file, but the three year assessment period begins on the date the extended return was filed, not the extension date.
Covid did not change the rule. But CP 2000 letters will come after April 15, 2024 for a 2020 return if the taxpayer filed sufficiently after April 15 that the IRS still has the time to complete the entire process and make the assessment by three years from the date the return was actually filed (or whatever extended assessment deadline there might be due to executing a waiver of the SOL, electing to appeal to Tax Court, etc).
Interestingly enough, these were all filed on time (and no extensions) and there is nothing else that would have extended the SOL. The IRS is way behind in issuing CP-2000 letters as it is. Pre-COVID we would have been seeing 2023 CP-2000s starting to come out now, and we are still only seeing 2021s. I haven't seen any 2022s yet, let alone any 2023s.