360° Coverage : How Long Can IRS Audit? It All Depends On You

2 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...

Filed under: news

 
 
 

25 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
2

4 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and s ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

New material promises 'perfect' solar absorption
New York, Oct 1 (IANS) Researchers at the Massachusetts Institute of Technology (MIT) have developed a material that comes very close to being "ideal" for solar absorption.
 
 
Acupuncture may not improve chronic knee pain
Sydney, Oct 1 (IANS) Among patients older than 50 years with moderate to severe chronic knee pain, acupuncture does not improve discomfort any more than "sham" acupuncture, says a new study.
 
 
OPEC daily basket price closes lower
Vienna, Oct 1 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $94.17 a barrel Tuesday, compared to $94.54 Monday, the OPEC Secretariat said.
 
 
New test for early cancer detection
London, Oct 1 (IANS) Early detection of cancer could now be as easy as a simple blood test.
 
 
 

Latest from the Network

Anne Hathaway messed up by fame
Anne Hathaway was ''f***ed up'' by fame. The 'Les Miserables' actress was left ''stressed out'' by her Hollywood success as she had no idea how to cope with life in the public eye. She told the new issue of Britain's...
Read more on Celebrity Balla
 
Amal Alamuddin: Our wedding was romantic and elegant
Amal Alamuddin says her wedding to George Clooney was ''romantic and elegant''. The 36-year-old lawyer tied the knot to the Hollywood hunk in Venice, Italy, on Saturday (27.09.14) and she has heaped praise on her...
Read more on Celebrity Balla
 
Demi Moore offers baby help to Ashton Kutcher?
Los Angeles, Oct 1 (IANS) Actress Demi Moore reportedly wants to help her ex-husband and actor Ashton Kutcher who is getting ready to welcome his first child with fiancé and actor Mila Kunis. Moore and Kutcher ended...
Read more on Celebrity Balla
 
Britain strikes IS positions in Iraq again
London, Oct 1 (IANS/EFE) British Royal Air Force (RAF) planes Wednesday launched airstrikes for the second time against Islamic State (IS) positions in Iraq, the British defence ministry announced. A British defence...
Read more on Politics Balla
 
Joseph 4th in drama-filled men's 800m final
Incheon, Oct 1 (IANS) India's Sajeesh Joseph finished fourth after three athletes were disqualified in a drama-filled men's 800 metres final at the 17th Asian Games here Wednesday. The 27-year old Indian, running in...
Read more on Sport Balla
 
Kanye West incensed at Kardashian's naked photo leak
Los Angeles, Oct 1 (IANS) Rapper Kanye West, who is married to reality TV star Kim Kardashian, was reportedly furious when he found out about naked pictures of his wife after they went online. Nude pictures of several...
Read more on Celebrity Balla
 
Tintu runs out of steam, settles for silver
Incheon, Oct 1 (IANS) It was once again a case of so near and yet so far for India's Tintu Luka who, despite leading in most of the women's 800 metres final race, was overtaken by Kazakhstan's Margarita Mukasheva in...
Read more on Sport Balla
 
Turkey seeks parliament's approval to send troops to Iraq
Ankara, Oct 1 (IANS/EFE) The Turkish government has submitted a request to parliament seeking authorisation to send troops to Syria and Iraq to combat Islamic State (IS) militants, officials here Wednesday said. The...
Read more on Politics Balla
 
No bad blood: Hemsworth on break-up with Cyrus
Los Angeles, Oct 1 (IANS) Despite his messy break-up with singer Miley Cyrus, actor Liam Hemsworth says he has no hard feelings for his ex-fiancee. The 24-year-old preferred to stay mum on his relationship with Cyrus...
Read more on Celebrity Balla
 
Asiad taekwondo: Indians knocked out
Incheon, Oct 1 (IANS) India's Nakul Malhotra (+87 kg) and Anand Pandia Rajan (-80 kg) were knocked out of men's quarter-final and Round of 16 matches, respectively, in men's taekwondo competition at the Asian Games...
Read more on Sport Balla