You own a small company in the Inland Empire, and an IRS revenue agent has spent most of a year on your 2022 return. She emailed a Form 872 and wants it signed within fourteen days, or she closes the exam on what she has. Your CPA says everyone signs.
Usually that is right, but on Sept. 30, 2026 the Tax Court held that a taxpayer cannot cut a fixed-date Form 872 short, so the version matters. And the IRS letter will not say that your signature also holds open the Franchise Tax Board’s window.
Does a federal Form 872 also extend the California FTB’s deadline?
Yes, automatically. California starts with four years from filing, one more than the IRS gets. Cal. Rev. & Tax. Code § 19057(a). A 25 percent omission gets six years under section 19058, and fraud or a missing return has no limit under section 19087. Under section 19065, once you extend the federal period, the FTB may assess until four years after filing or “six months after the date of the expiration of the agreed period,” whichever is later. No FTB request is needed.
It may ask anyway. Section 19067 authorizes state waivers, and the FTB’s audit manual prefers one even though the FTB “can and will” assess on an open federal consent. The state notice right in section 19067(b) covers refusing or limiting the time, but unlike the federal rule below, not limiting issues.
What does IRS Form 872 do to my audit statute of limitations?
Federally, the IRS normally gets three years from the filing date to assess more tax. 26 U.S.C. § 6501(a). Omitting over 25 percent of stated gross income makes it six years under section 6501(e)(1)(A), and fraud or a missing return leaves the year open indefinitely under section 6501(c)(1) and (c)(3). I check for those first; a consent cannot shorten them.
Section 6501(c)(4)(A) lets both sides agree in writing, before the period expires, to a later deadline. Since the 1998 Restructuring and Reform Act, section 6501(c)(4)(B) has required the IRS to tell you, each time it asks, that you may refuse or “limit such extension to particular issues or to a particular period of time.” IRS Publication 1035 repeats those rights.
Form 872 names a date. Form 872-A names none; under IRM 25.6.22.7.1 and Rev. Proc. 79-22 it ends 90 days after your Form 872-T reaches the IRS, 90 days from the IRS mailing one to you, or following a notice of deficiency. Nothing else ends it, so an 872-A holder needs a calendar entry for that decision.
Can I end a Form 872 early with Form 872-T after Fine v. Commissioner?
No. Barry Fine and Monica Dias signed Forms 872 carrying 2015 to Dec. 31, 2021 and 2016 to June 30, 2021. After Appeals talks failed, their lawyer sent Forms 872-T by fax on Sept. 11, 2020, checking the only box offered, the one for Form 872-A. Notices dated April 15, 2021 proposed $405,943 and $210,003 of tax, seven months after the fax but before the 872 dates.
Judge Ashford held that “Form 872-T does not terminate a properly executed Form 872.” Fine v. Commissioner, 167 T.C. No. 13 (Sept. 30, 2026). The court took from Stange v. United States, 282 U.S. 270 (1931), that a consent is a “voluntary, unilateral waiver of a defense,” not a contract, yet applied contract rules to mutual assent, citing Kronish v. Commissioner, 90 T.C. 684 (1988), and Piarulle v. Commissioner, 80 T.C. 1035 (1983). Open-ended deals end at will; a bargained date binds. Hence “only the passage of time can terminate Form 872.”
California cases appeal to the Ninth Circuit, which is just as strict. Kinsey v. Commissioner, 859 F.2d 1361 (9th Cir. 1988), rejected an implied termination of an 872-A. Kelley v. Commissioner, 45 F.3d 348 (9th Cir. 1995), upheld reforming two 872-A forms to the years the parties meant. A Kelley footnote does describe Form 872-T ending a consent given “by an IRS Form 872 or 872-A”; Fine called it a passing recital of facts. Because Golsen v. Commissioner, 54 T.C. 742 (1970), has the Tax Court follow the circuit of appeal, a Californian could press that footnote. I would not build a case on it.
If you already signed, plan around the date. You can refuse the next extension; the opinion says the Fines could have negotiated “a shorter timeframe or limited the IRS’s examination to certain issues.”
Did an IRS examiner just hand you a Form 872 with a two-week deadline? Its terms can only be negotiated before you sign and before the current statute date passes; after that, Fine says the date on the form controls.
When can the FTB assess after an IRS audit change, and what if I never report it?
Section 18622(a) requires an individual to report a federal change that raises California tax within six months after the “final federal determination,” meaning the date the IRS assesses it under subdivision (d). Report on time, and section 19059(a) gives the FTB two years from the report, or the section 19057, 19058 or 19065 period if later. Report late, and section 19060(b) allows four years from the report. Never report, and section 19060(a) permits an assessment “at any time.”
You can protest a proposed FTB assessment within 60 days under section 19041, and appeal the FTB’s protest decision within 30 days under section 19045 to the Office of Tax Appeals, which inherited that role from the Board of Equalization under Gov. Code § 15672.
How would a Form 872 play out for a Temecula S corporation owner?
An illustrative case: Priya owns an S corporation in Temecula and files a joint 2022 Form 1040 on Oct. 16, 2023. In summer 2026, before the Oct. 16, 2026 federal deadline, Priya signs a Form 872 extending 2022 to Dec. 31, 2027. The 1040 is the return that counts: Bufferd v. Commissioner, 506 U.S. 523 (1993), held that a shareholder’s period runs from the shareholder’s own return.
In spring 2027 the IRS disallows $170,000 of flow-through corporate deductions and proposes about $60,000 of tax. Priya agrees, and the IRS assesses on Aug. 2, 2027. California’s ordinary deadline was Oct. 16, 2027; section 19065 moves it to June 30, 2028. Priya must report by Feb. 2, 2028. At an assumed 9.3 percent rate, California wants about $15,810, plus interest under section 19101 from the original due date. The corporation’s 1.5 percent tax under section 23802 could add $2,550 if its own California year is still open.
File the amended California return in January 2028 and the FTB has until January 2030 under section 19059. Never file it, and 2022 never closes.
Should I sign Form 872, ask for a restricted consent, or refuse?
Refusing is lawful, and Publication 1035 says it carries no penalty and does not shift the burden of proof. But the examiner then closes on her file, and the notice of deficiency rests on it. You get 90 days to petition the Tax Court (a hard deadline, as my post on Kings Road explains), and once the case is docketed, 26 U.S.C. § 6503(a) suspends the statute until the decision is final plus 60 days. Refusing does not run out the clock.
A restricted consent extends the period for named issues and lets the rest expire (IRM 25.6.22.8). The IRS treats this as a right to ask and agrees mainly when few issues remain open and the rest are settled.
I sign when the agent needs time and a notice built on half a record would be worse. I decline when the statute is weeks away and the issues are fully developed, since more time would only invite new ones. The CPA’s workpapers often decide it. If they tie each deduction to an invoice, I want a short restricted consent, because the answers already exist. Thin workpapers mean you need time to rebuild support, yet time lets the agent wander, so I press for issue limits. Then I calendar the federal date and the date six months later, which belongs to the FTB.
| Choice | How long the IRS gets | Can you end it early? | Effect on the FTB clock | When it makes sense |
|---|---|---|---|---|
| Refuse to sign | Current statute date, then § 6503(a) suspension | Nothing to end | Normal four years (§ 19057) | Statute near, issues fully developed |
| Form 872, fixed date | To the agreed date | No (Fine) | Open six months past the agreed date (§ 19065) | Agent needs time; records can answer |
| Form 872, restricted consent | Agreed date, listed issues only | No, for the listed issues | Same; state-only issues untested | Few open issues, the rest agreed |
| Form 872-A with 872-T | Until 90 days after an 872-T or notice | Yes, by Form 872-T | Open while it is, plus six months | Appeals cases, with the 872-T calendared |
Frequently Asked Questions
Do I have to sign Form 872 if the IRS asks?
No. The IRS must tell you that you may refuse or limit it, and refusing carries no penalty. Expect a notice of deficiency soon afterward.
Can Form 872-T cancel a Form 872 I already signed?
Not under Fine v. Commissioner. Form 872-T ends only an open-ended Form 872-A, and a fixed-date Form 872 lasts until its date. You can still decline any further extension.
Does signing a federal Form 872 give the California FTB more time?
Yes. Revenue and Taxation Code section 19065 keeps California’s period open until six months after the federal agreed period expires, if that is later than the normal four years.
How long do I have to tell the FTB about an IRS audit change?
Six months after the IRS assesses the change, under section 18622. If you never report it, section 19060 lets the FTB assess at any time.
Can I limit a Form 872 to certain audit issues?
You can ask for a restricted consent. The IRS usually agrees when the open issues are few and clearly described and the rest are settled, and IRS Counsel must approve the wording.
How North Star Law Firm Can Help
North Star Law Firm represents California taxpayers in IRS and FTB examinations through its tax defense practice, and handles the disputes that follow in the Tax Court and the Office of Tax Appeals. It also seeks penalty abatement when a federal change brings California penalties. Phillip Zagotti is a California attorney and a CPA admitted to the U.S. Tax Court.
If an examiner wants a statute extension, contact North Star Law Firm or schedule a consultation before the current date runs out.