Accepted Answer

Dear heathergirl,

 

IN Colorado, the statute of limitations on collecting state taxes is tied to the federal statute, and can be extended plus one years. Also in Colorado, the statute of limitations does not apply in cases of OMISSION or fraud. The statute for collections is generally 10 years.

 

REFERENCE http://www.revenue.state.co.us/fyi/html/generl18.html - the federal statute of limitations and any activity that affects the federal time frame will impact the Colorado statute of limitations. [§§39-21-107(2) and 39-21-108, C.R.S.]

 

When a taxpayer fails to file an income tax return or files a false or fraudulent return with intent to evade the tax, the tax may be assessed and collected at any time. [§39-21-107(4), C.R.S.]

 

The Colorado statute of limitations can be extended beyond the federal statute of limitations plus one year in the following situations:

• When there is a written agreement between the taxpayer and the executive director to extend the statute of limitations. [§39-21-107(5), C.R.S.]
• When the taxpayer fails to notify the executive director in writing within 30 days of any final determination from the federal IRS. [§39-22-601(6)(c), C.R.S.]
• When the taxpayer fails to file an amended Colorado income tax return to notify the executive director of the filing of an amended federal income tax return reflecting any change in income reportable to the state of Colorado. [§39-22-601(6)(d), C.R.S.]
• When a written proposed adjustment (e.g. a notice of deficiency or assessment) of the tax liability has been issued by the Department, the limitation is extended one year after the final determination of assessment is made. [§39-21-107(1), C.R.S.]

Federal statute of limitation for assessments is 10 years. The 10 year statute of limitations can be extended by agreement between the taxpayer and the IRS provided the agreement is made prior to the expiration of the 10 year period. See section 6501(c)(4) of the Tax Code and section XXX.XXXX(c)-1(d) of the Tax Regulations.

Regarding the abatment of interest and penalties.

 

The IRS may sometimes abate interest and penalties but they normally do not.

 

Instead they like to see installment agreements that are honored. If the IRS figures you or the estate (person responsible for the tax) can reasonably pay this over time, they will not generally entertain offers in compromise or abatements of interest.

 

If you are having an attorney to file this for you, he or she should be able to negotiate something on the delinquent filing based on voluntary compliance. BUT in the case of the return that was filed and a balance is owed, they will not have much success.

 

Abatement: http://www.irs.gov/instructions/i843/ch02.html

 

Offers in compromise: (better chance than abatement): http://www.irs.gov/businesses/small/article/0,,id=104593,00.html

 

 

 

 

Expert:	bizmatters
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Answered:	9/21/2009

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