Almost every rule in the statute of limitations chapter of the Code gives the IRS more time. Section 6501(d) is one of the few that lets a taxpayer take time away. It allows certain fiduciaries and corporations to demand that the IRS assess within 18 months, instead of the usual three years.

It exists for a practical reason. An executor cannot close an estate, and a corporation cannot wind up its affairs, while a three-year cloud hangs over the last returns. This guide covers who can use the rule, how to make the request and what it does not do.

The statute

Section 6501(d) says that, except as otherwise provided in subsections (c), (e) or (f), for any tax other than the estate tax under chapter 11 for which a return is required in the case of a decedent, or by the decedent's estate during the period of administration, or by a corporation, the tax shall be assessed, and any court proceeding without assessment shall be begun, within 18 months after a written request. The request must be filed after the return is made and in the manner and form the regulations prescribe. It is made by the executor, administrator or other fiduciary representing the estate, or by the corporation. The period can never run past three years after the return was filed.

In other words: file the return, then file the request, and the IRS has 18 months from the request or three years from the return, whichever ends first.

Who can use it

The statute names two groups. The first is the fiduciary of a decedent's estate, for returns required of the decedent or of the estate during administration. That includes the decedent's final income tax returns and the estate's own income tax returns. It does not include the estate tax return, which the statute expressly excludes.

The IRS describes the same scope. IRM 25.6.1, in its discussion of prompt assessment requests, says the request must be made by a fiduciary representing the estate of a decedent and concern the liability of the decedent or the estate for income tax or gift tax, but not estate tax, or by a fiduciary representing a dissolved corporation or one contemplating dissolution.

The second group is corporations, but with conditions. Section 6501(d) applies to a corporation only if one of three things is true: the request notifies the IRS that the corporation contemplates dissolution within the 18-month period, the dissolution is begun in good faith within that period and it is completed; or the request notifies the IRS that a dissolution has been begun in good faith and it is completed; or a dissolution has already been completed when the request is made. A going concern cannot use the rule to shorten its own audit exposure.

How to make the request

IRM 25.6.1 says the request is generally made on Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d). The request is filed after the return. It cannot be filed with the return or before it.

Treat it as a deadline document. Send it in a way that proves receipt, keep a copy and calendar the 18-month date. The timely mailing rule explains why certified or registered mail matters when you need to prove when the IRS got something.

Make sure the person signing has authority. For an estate, that is the executor, administrator or other fiduciary. The IRS may not treat a request as valid if it comes from someone without authority to act.

What it does not shorten

Section 6501(d) opens with an important qualification: except as otherwise provided in subsection (c), (e) or (f). The 18-month rule does not override those exceptions.

  • Subsection (c) includes the fraud rule, the no-return rule and consents. If a return was fraudulent, or a required return was never filed, the prompt assessment request does not create a deadline that would not otherwise exist. See the guides to fraud and unfiled returns.
  • Subsection (e) is the six-year rule for substantial omissions. If a return omits more than 25 percent of gross income, the six-year period still applies. See the six-year guide.
  • Subsection (f) is the personal holding company rule, which provides six years if certain schedules are not filed.

So a prompt assessment request is most effective when the returns are complete, accurate and filed. It does not repair a problem return.

What the IRS does when it receives one

The request forces the IRS to decide. Within the shortened period, the IRS will either accept the returns as filed or examine them. If it examines and proposes more tax, the normal deficiency procedures apply, and a notice of deficiency mailed within the period suspends the clock under IRC 6503(a). The guide on notices of deficiency covers that process.

The IRS can also ask for a consent extending the shortened period. The same rights apply as for any other consent under IRC 6501(c)(4): you can refuse, limit the issues or limit the time. See the guide on Form 872.

Strategy for fiduciaries

An executor who distributes assets while the IRS can still assess tax may take on risk, depending on the facts and the law that applies to the estate. Shortening the window lets the fiduciary know sooner whether there is more tax to pay before final distributions are made.

The prompt assessment request is not the only tool in an estate administration, and it is not always the right one. If the decedent had unfiled years or questionable positions, asking the IRS to look quickly may invite exactly the attention you want to avoid, and it may not shorten anything because of the exceptions. Make the decision with the full filing history in front of you.

Also remember that the request shortens the assessment period only. Tax that is properly assessed is still subject to the ten-year collection statute.

Mistakes that waste the request

  • Filing the request with the return instead of after it. The statute requires the request to be filed after the return is made.
  • Asking for a prompt assessment of the estate tax. Chapter 11 estate tax is excluded from IRC 6501(d).
  • Assuming the request cuts off a year with a missing return, a fraudulent return or a large omission. The exceptions in subsections (c), (e) and (f) still apply.
  • For a corporation, filing the request without the dissolution facts the statute requires. A corporation that is not dissolving, has not begun dissolving in good faith or does not complete the dissolution cannot rely on the 18-month period.
  • Losing track of the dates. The request is only useful if someone calendars the 18-month date and the three-year outside date and knows which one ends first.

The bottom line

Under IRC 6501(d), an estate fiduciary or a dissolving corporation can file a written request, generally on Form 4810, after filing a return, and require the IRS to assess within 18 months, but never later than three years after the return was filed. Estate tax is excluded. The fraud, no-return, consent, six-year and personal holding company exceptions still apply.

Used on clean returns, it is one of the few ways a taxpayer can make the IRS move faster. Used on problem returns, it changes nothing except the IRS's priorities.

Before filing the request, review each return it covers as if an examiner were reading it the next day, because one may be. Confirm that every required return for the decedent or the corporation was filed, that income was fully reported and that positions taken are supported. A request filed on that foundation does what Congress intended: it brings the IRS to a decision quickly so the fiduciary or the corporation can finish its work.