Statute of Limitations

[STAT-yoot of lim-i-TAY-shuhns]

What is the definition of Statute of Limitations?

A law that sets the maximum period during which legal proceedings may be initiated or rights enforced. In the context of tax returns, the statute of limitations typically extends for three years from the date the return is due or actually filed.

Using Statute of Limitations in an Example

For tax purposes, if an individual files their income tax return on April 15, 2020, the IRS has until April 15, 2023, to audit this return under the statute of limitations, unless there is a case of fraud or substantial underreporting of income.

Using Statute of Limitations in a sentence

The attorney advised checking the statute of limitations to determine if we can still pursue a legal claim against the debtor.

Related Terms

Surviving Spouse

A person whose spouse has died within the tax year and who may file a joint tax return for that year. Additionally, the surviving spouse can file joint returns for the next two years if they remain unmarried and maintain a household as the principal residence for a dependent child.

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Swap

A financial contract in which two parties agree to exchange streams of payments over a specified period, based on different indices such as interest rates, foreign exchange rates, or equity indices, applied to a notional amount. Swaps typically do not involve the exchange of principal.

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