Statute of limitations
In short
The deadline on assessing additional tax. Four years where a return was filed, and no deadline whatsoever where one was not.
In full
A.R.S. § 42-1104(A) requires a notice of additional tax to be mailed within four years after the return was required to be filed, or within four years after it was filed, whichever expires later. Filing late therefore extends the Department's window rather than starting it sooner.
Subsection (B) lists the exceptions, and one of them governs most catch-up work. Under (B)(1) the Department may assess or begin a collection proceeding at any time in the case of a false or fraudulent return with intent to evade, in the case of failure to file a return for any tax administered under title 42 other than income tax and withholding tax, and in the case of failure to file an income or withholding return where intent to evade is shown.
Transaction privilege tax is administered under title 42 and is neither income tax nor withholding tax. A period for which no return was filed therefore has no limitation period and never acquires one.
The legislature drew the contrast itself. Paragraph (B)(10) gives the Department seven years to assess where an income or withholding return was not filed. No equivalent paragraph exists for transaction privilege tax.
One further exception reaches a filed return. Where the taxpayer omits an amount properly includible that exceeds twenty-five percent of the gross income stated on the return, (B)(2) allows assessment within six years.
A contractor who has never filed is carrying exposure with no end date. The route that ends it is the Voluntary Disclosure Program, and eligibility for that closes the moment the Department makes contact.
| Situation | Period | Authority |
|---|---|---|
| Return filed | Four years from the due date or from filing, whichever expires later | (A) |
| No TPT return filed | No limitation — assessable at any time | (B)(1)(b) |
| False or fraudulent return with intent to evade | No limitation — assessable at any time | (B)(1)(a) |
| Omission exceeding 25% of gross income stated on the return | Six years from filing | (B)(2) |
| No income or withholding return filed | Seven years from the due date | (B)(10) |
A.R.S. § 42-1104(A), (B)(1), (B)(2), (B)(10)