Archive for Audit

How Far Back Can The IRS Audit?

How Far Back Can The IRS Audit?

Navigating the labyrinthine world of U.S. taxes, including federal tax returns and individual tax returns, is challenging enough when you’re stateside. For U.S. expatriates, the complexity can multiply. One question that often looms large is, “How far back can the IRS audit?” Understanding the rules, statute of limitations, and exceptions surrounding IRS audits is crucial for maintaining compliance and peace of mind. Generally, the IRS has a three-year window to audit your tax returns, but as you’ll see, there are exceptions.

If you don’t file your tax returns, the statute of limitations never starts, allowing the IRS to audit the return at any time in the future. This is particularly important for U.S. expats who might assume they’re exempt from filing because they’re living abroad.

Related: Common Mistakes To Avoid When Claiming Foreign Earned Income Exclusion

What Is The Statue Of Limitations?

The term “statute of limitations” refers to the time frame within which the IRS is legally allowed to audit your tax returns for potential errors, omissions, or fraud. This period is generally three years from the date you filed your return or the due date of the return, whichever is later. After the statute of limitations expires, the IRS generally can’t question the information you’ve reported on your individual income tax return, or your filing history, or request additional documentation.

Taxpayers generally have three years from the date they filed their original tax return to claim a refund.

What Happens When You Don’t File Your Tax Returns?

Read More

Written by | Posted in Audit

How Far Back Can The IRS Audit?

How Far Back Can The IRS Audit?

Navigating the labyrinthine world of U.S. taxes, including federal tax returns and individual tax returns, is challenging enough when you’re stateside. For U.S. expatriates, the complexity can multiply. One question that often looms large is, “How far back can the IRS audit?” Understanding the rules, statute of limitations, and exceptions surrounding IRS audits is crucial for maintaining compliance and peace of mind. Generally, the IRS has a three-year window to audit your tax returns, but as you’ll see, there are exceptions.

If you don’t file your tax returns, the statute of limitations never starts, allowing the IRS to audit the return at any time in the future. This is particularly important for U.S. expats who might assume they’re exempt from filing because they’re living abroad.

Related: Common Mistakes To Avoid When Claiming Foreign Earned Income Exclusion

What Is The Statue Of Limitations?

The term “statute of limitations” refers to the time frame within which the IRS is legally allowed to audit your tax returns for potential errors, omissions, or fraud. This period is generally three years from the date you filed your return or the due date of the return, whichever is later. After the statute of limitations expires, the IRS generally can’t question the information you’ve reported on your individual income tax return, or your filing history, or request additional documentation.

Taxpayers generally have three years from the date they filed their original tax return to claim a refund.

What Happens When You Don’t File Your Tax Returns?

Read More

Written by | Posted in Audit

Six-Question SALT Transfer Pricing Quiz – Know Enough to Win?

SALT TP

The 2022 SALT Transfer Pricing Quiz (the “Quiz”) is anything but your run-of-the-mill test of knowledge.

We created the six multiple-choice question Quiz based on our two-part Tax Notes State article, “SALT Transfer Pricing — What You Need to Know” (“the article”), which was published in January 2022. The Quiz is designed to reinforce foundational “SALT 101” and “TP 101” level content and recent developments in these interrelated tax fields. You’ll score well on the Quiz if you have basic SALT and transfer pricing know-how, even without reading the article.

Launch Quiz!

However, if you’re unsure of your Quiz answers, all correct answers (and instructions on how to determine the answer to the sixth and final question) can be found in SALT Transfer Pricing — What You Need to Know: Part 1 and SALT Transfer Pricing — What You Need to Know: Part 2. We can share a limited number of copies of the article with interested readers. You can request the article within the Quiz or by contacting Guy Sanschagrin or Doug Schwerdt of WTP Advisors.

Trying to gauge your interest in diving deeper into SALT transfer pricing? Check out our recent flyover of Part 1 of the article: Six “SALTy” Transfer Pricing Facts.

We hope you enjoy self-assessing your SALT transfer pricing know-how, competing with tax peers to become the “2022 SALT Transfer Pricing Quiz Champion,” and taking home a prize from a lineup of emblematic Peugeot SALT mills/grinders – your choice from an array of colors that are reminiscent of the American flag.

The deadline for online Quiz submission is Saturday, April 30, 2022.

WTP Advisors is administering the Quiz and all of your Quiz responses (score, name, etc.) will be kept in strict confidence (all Quiz submission data will also be deleted on May 31, 2022).

 

If you have any questions or would like more information on this blog post or the Quiz, please contact the authors:

Guy Sanschagrin, Principal in Charge of Transfer Pricing and Valuation Services, WTP Advisors    guy.sanschagrin@wtpadvisors.com

Doug Schwerdt, Transfer Pricing Specialist & Intra-Group Financial Transactions Leader, WTP Advisors    doug.schwerdt@wtpadvisors.com

 

#TransferPricing #SALT #MTC #SITAS #WTPAdvisors #TransPortal #SALTpartners #TGS #ThinkGlobalSustainability   

Written by | Posted in Audit • Exam • MTC • SALT Partners • SITAS • Tax Notes State • Transfer Pricing • WTP Advisors

Michigan Sales And Use Tax Audits: Have You Been Selected?

Michigan Sales And Use Tax Audits: Have You Been Selected?

One of our team members sat in on the Michigan Department of Treasury’s MI sales & use tax audit webinar to provide this short summary for your reference. Here are some tips to make your audit process easier and less painful!

Understand Your Basic Responsibilities

If you’ve already been selected for an audit and are familiar with your tax-collection responsibilities, skip ahead. For everyone else, it is important to know that sales & use tax collection is your obligation. When you don’t collect sales & use tax the liability falls on you. Even though customers commonly pay sales taxes, the selling business is the one responsible for adequately collecting and remitting sales taxes. (If you need help with sales tax compliance, reach out to one of our tax experts here.)

Fortunately, MI is an easier state to deal with sales and use tax. They only have the 6% rate for the entire state with no local rates, and their online platform MTO (Michigan Tax Online) is helpful and can make the process much easier! (Read about the benefits of MTO and refresh on general MI sales and use tax tips here.)

Why Did I Get Picked For An Audit?

Read More

Written by | Posted in Audit • Michigan Sales And Use Tax

National Taxpayer Advocate Interactive Map: What Happens When You Are Audited

National Taxpayer Advocate Interactive Map

The Taxpayer Advocate Service (TAS) reintroduces its website with a new design and layout featuring a new digitally interactive Taxpayer Roadmap.

The digital Taxpayer Roadmap features an interactive experience which allows taxpayers and tax professionals to navigate through the IRS tax process and view notices along the way. The newly designed website continues to provide valuable information and resources to taxpayers and tax practitioners that can help them resolve tax problems with the IRS, including the “Get Help” section with its more than 50 common tax-related topics available to help citizens understand and, in many cases, resolve general tax issues.

The new TAS website is an important public tax resource. The updated site focuses on what taxpayers need to know, including their rights as a taxpayer.

National Taxpayer Advocate

Written by | Posted in Audit • National Taxpayer Advocate

Understanding IRS Notices: A Guide For Tax Audits

Venar Ayar - Top Tax Audit Defense Attorney

This Guide For Tax Audits was prepared by Tax Lawyer Venar Ayar. The Guide covers the many notices that the Internal Revenue Service sends to individual taxpayers regarding tax audits. This is an excellent guide for tax professionals and taxpayers alike and we thank Ayar Venar for compiling this information and reference guide for our readers.

Please be advised that all tax audits should be handled by an experienced tax professional. Please refer to the guide below:

IRS NOTICE NUMBER – TOPIC – NOTICE  DESCRIPTION – VENAR AYAR’s ADVICE

CP11–Audits   This notice states that your return has been changed because the IRS believes there was a miscalculation. This means you owe money on your taxes because of this. Double-check the numbers on your tax return to confirm that you actually did make a mistake.  If there was no mistake on the original return, you need to respond to the notice with an explanation.

CP14- Balance Due   The IRS has sent this notice because you owe money on unpaid taxes. This is the first letter sent in the collection process. It is the initial tax bill sent.  The letter gives you an opportunity to pay the tax in full to prevent any collection actions.  If you ignore the letter, the IRS will continue sending notices that get more and more threatening, and will eventually start taking collection actions.

Read More

Written by | Posted in Audit • IRS Notice Numbers

Corporate Executive Compensation Compliance: Audit Techniques Guide (Part IV)

Every publicly held corporation maintains its executive compensation records differently. Likewise, every publicly held corporation maintains different methods for compensating its executives. As the examining agent, you must first learn the identity of the individual(s) within the corporation who are most familiar with how the executive compensation records are maintained. You will need to have a general discussion with that person regarding the record maintenance and retention practices of the corporation with regard to executive compensation. This discussion will help you narrow the focus of your IDRs and will also familiarize you with in-house terminology that is utilized by the corporation when discussing and researching records concerning executive compensation. Read More

Written by | Posted in Audit • Corporate Executive Compensation Compliance • TaxConnections

IRS Audit Triggers: 10 Red Flags To Avoid

In 2017, the IRS received more than 152 million tax returns from individuals, married couples, and businesses. And these numbers are predicted to increase for 2018. With so many people filing, you’d think it’s highly unlikely to get audited. However, you should think again. Since the IRS began allowing e-filing, many people have been filing taxes themselves, which means they’re more likely to make mistakes.

This is one important reason why the IRS set up a filter system to pay specific attention to certain parts of your tax return and flag them if they seem suspicious or potentially inaccurate. You’ll have a much better chance of avoiding an audit if you keep these 10 IRS audit triggers in mind when you file your taxes. Read More

Written by | Posted in Audit • IRS

2017 IRS Data Book Shows Chances Of Being Audited

The IRS has published the 2017 version of its annual IRS Data Book, which contains statistical information about the IRS and taxpayer activities during the previous year. The IRS Data Book helps illustrate the breadth and complexity of the U.S. tax system. According to the Data Book, during fiscal year 2017 (Oct. 1, 2016 to Sept. 30, 2017), the IRS collected overall more than US$ 3.4 trillion from taxpayers, processed more than 245 million tax returns and other forms, and issued more than $436 billion in tax refunds.

The IRS also audited almost 1.1 million tax returns during fiscal year 2017.  Almost 90% of the audited returns were individual income tax returns. While the percentage of overall returns audited was relatively low at 0.5% overall, the percentages were significantly higher for two types of taxpayers – wealthy individuals and individuals filing international returns. Read More

Written by | Posted in Audit • IRS

IRS Audit Rates Continue Downward Spiral

For years, IRS audit rates have been declining as Congress has cut the IRS budget and its workforce has shrunk. The agency has relapsed its audit statistics for 2017, which marked the sixth consecutive year that audit rates have gone down.

The number of people audited by the IRS in 2016 dropped to just over 1 million. The last time so few people were audited was 2004. Since then, the U.S. has added about 30 million people. Read More

Written by | Posted in Audit • IRS

Am I At Risk For Being Audited?

Even though some IRS audits are chosen at random, there are a few factors that could put Texas taxpayers at an increased risk.

Taxpayers in Texas may understandably have a fear of being audited. After all, an Internal Revenue Service audit may be incredibly time-consuming and end in the consumer having to pay money to the government. However, that is not always the case. Read More

Written by | Posted in Audit • IRS

What To Do When You Receive An Audit Letter

Summer is typically when the IRS sends out notices and audit letters, so if you’ve received one, remember, first and foremost, don’t freak out.

Don’t panic!

After all, it’s just a piece of paper sent to you from the IRS. While the IRS can be scary, if you are a law-abiding taxpayer, I assure you even if you end up getting audited it’s not as scary as it seems. Read More

Written by | Posted in Audit
« Older Entries