10 Updates

How Long Can IRS Audit? It All Depends On You

Apr 3 2014, 8:28am CDT | by

In most cases, the IRS has three years after you file to audit. If the IRS shows up after that, you may be able to point out that the statute of limitations has run. It’s better than hunting for...

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16 weeks ago

How Long Can IRS Audit? It All Depends On You

Apr 3 2014, 8:28am CDT | by

In most cases, the IRS has three years after you file to audit. If the IRS shows up after that, you may be able to point out that the statute of limitations has run. It’s better than hunting for receipts! But there are many special rules that can extend the purgatory.

First, the three years is doubled to six if you omitted more than 25% of your income. It’s also doubled if you failed to disclose a foreign account. Even worse, the IRS has no time limit if you never file a return. The three years never starts to run.

There’s also no time limit on fraud. Fraud is the IRS’s greatest trump card. You might think the IRS might assert fraud just to get unlimited time. Fortunately, though, the IRS has a high burden to show fraud. Here are other timing rules you should know.

Extend? The IRS may contact you (usually about two and a half years after you file), asking you to extend the statute. Most tax advisers say you should usually grant an extension. Some taxpayers say “no” or ignore the request. Either usually leads the IRS to send a notice assessing extra taxes .

Amend? To amend a tax return, do it within three years of the original filing date. If your amended return shows an increase in tax, and you submit the amended return within 60 days before the three-year statute runs, the IRS only has 60 days after it receives the amended return to make an assessment. An amended return that does not report a net increase in tax does not trigger an extension of the statute.

Refunds. If you pay estimated taxes or have excess withholding but fail to file a return, you generally only have two years (not three) to get it back.

State Timing. Some states have the same three- and six-year statutes as the IRS. But some set their own time clocks, giving themselves even more time to assess extra taxes. In California, for example, the basic tax statute of limitations is four years. However, if the IRS adjusts your federal return, you are obligated to file an amended return in California. If you don’t, the California statute will never expire.

Partnerships? Partnerships and LLCs generally don’t pay tax themselves, even though they file tax returns. Rather, their partners or members pay the tax. Statute issues come up frequently with partnerships. For example, what happens when a tax notice is sent to a partnership, but not to its individual partners?

The audit or tax dispute may be ongoing, but you may have no personal notice of it. As a result there are numerous special rules for partnerships. In general, partnerships have a “tax matters partner” who gets notice.

John Doe Summons. Another set of rules says the statute of limitations may be “tolled” (held in abeyance) by an IRS John Doe summons. That is so even if you have no notice of it. It works like this.

Suppose that a promoter has sold you on a tax strategy. The IRS may issue a summons to the promoter asking for all the names of his clients and customers. While the promoter fights turning over those names to the IRS, the statute of limitations clock for his clients is stopped.

Bottom Line? Statute of limitations issues can be pivotal in tax cases. Of course, the difference between winning and losing often depends on records. The statute usually begins to run when a return is filed, so keep certified mail or courier confirmation. If you file electronically, keep all the electronic data, plus a hard copy of your return. If you can successfully assert a defense based on the statute of limitations, you don’t have to go further!

You can reach me at Wood@WoodLLP.com . This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told toda ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rak ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Dat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in com ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister D ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 m ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Ba ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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