Tag Archive for Statute of Limitations

How Long Are You On The Hook For A Tax Assessment?

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A frequent question from taxpayers is:

How long does the IRS have to question and assess additional tax on my tax returns?

For most taxpayers who reported all their income, the IRS has three years from the date of filing the returns to examine them. This period is termed the statute of limitations. But wait – as in all things taxes, it is not that clean cut. Here are some complications:

You file before the April due date – If you file before the April due date, the three-year statute of limitations still begins on the April due date. So filing early does not start an earlier running of the statute of limitations. For example, whether you filed your 2014 return on February 15, 2015 or April 15, 2015, the statute did not start running until April 15, 2015. Read more

Read This Before Tossing Old Tax Records

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Article Highlights:

• Reasons to Keep Records
• Statute of Limitations
• Maintaining Record of Asset Basis

Now that your taxes have been completed for 2014, you are probably wondering what old records can be discarded. If you are like most taxpayers, you have records from years ago that you are afraid to throw away. It would be helpful to understand why the records must be kept in the first place.

Generally, we keep tax records for two basic reasons: (1) in case the IRS or a state agency Read more

Criminal Tax Evasion – Statute of Limitations – When Must the Indictment Be Brought?

TaxConnections Tax Blog Post - Statute of Limitations on Tax EvasionFor any of you out there who are hiding income or assets from the taxman, please take the time to learn about how the statute of limitations rules work. I have had clients mistakenly believing that the passing of several years since the filing of their returns which deliberately omitted income will afford them protection.

The tax laws contain what is known as a statute of limitations. The statute prescribes the length of time permitted to the government to enforce the tax laws. If the length of time runs out for a particular tax year, then the government is forever barred from asserting tax claims or bringing an indictment against you. It is important to understand how the statute of limitations works, because in certain cases, the statute of limitations will be longer than others or it will not start to run at all.

Today’s blog posting focuses on the statute of limitations that applies in the case of the Government bringing a criminal indictment for the crime of tax evasion – for example – when a taxpayer files a return, but it is a false return that under-reports his income; or when the taxpayer willfully does not file a return so as to evade taxes.

Criminal Tax Evasion

The general rule is that the statute of limitations is for a six year period that commences once the tax return is filed; or from the date there was a willful failure to file the return when otherwise due. The six-year statute of limitations is Read more

Trust Fund Recovery Penalty – #8 – Statute Of Limitations

TaxConnections Picture - Dollar Sign and Money8. STATUTE OF LIMITATIONS

§ 5:47 In General

Under the Code, a Trust Fund Recovery Penalty must be assessed within three years of the April 15th following the year during which the quarterly liabilities arose. [I.R.C. § 6501 (a), (b)(2)] For example, the penalty with respect to liabilities arising during 1985 must be assessed on or before April 15, 1989. If the return is filed later than the April 15th following the year during which the liability arose, the statutory period for assessment is three years from the date of filing. If the returns were prepared by the IBS pursuant to I.R.C. § 6020(b), the IRS contends that there is no statute of limitations. [LR.C. § 6020(b)]. The .Internal Revenue Service in the past attempted to argue that there is no statute of limitation for the § 6672 penalty. The Third Circuit, however, ruled that the statute of limitation provided in § 6501(a) does apply to assessments of § 6672 Liabilities.

§ 5:48 Extension During Appeal

If a written preliminary notice of proposed liability is mailed or delivered in person to a ”responsible person-‘ before the’ expiration of the statute of limitations for the assessment of the penalty, the statute will not expire before the later of:

(1) 90 days after the date the notice was mailed or delivered in person, or

(2) if there is a timely protest of the proposed assessment, 30 days after a determination on the protest. Read more

Overseas Taxpayers — When Can I Destroy My Tax Documents?

Climbing a Pile of FilesMany of us wish to clear out old papers and files and this includes getting rid of old tax returns and supporting documentation. The problem is that we never know when it is quite safe to destroy the old tax documents.  Unfortunately, there is no bright line rule to answer this question.  Taxpayers with foreign (non-US) assets have particular rules to pay special attention to.   Overseas taxpayers may also find it more difficult to obtain records from financial institutions located abroad and thus, they should be even more careful with record retention.

General Guidelines

Below are some general guidelines to help determine when it may be permissible to destroy tax paperwork.

First and foremost, I remind clients that in the event of an IRS or State tax audit, the burden of proof is on the taxpayer to provide support for a tax position he has taken on the return.  This is especially important when claiming tax deductions.  As such, the premature destruction of documents could mean you lose in a tax audit.

The different rules contained in the tax statutes of limitation are very helpful in providing guidance as to the minimum retention periods for tax documents. It is critical that records such as receipts or canceled checks supporting an item of income or a deduction be kept until the statute of limitations expires for that year’s tax return.  With this in mind it is important to remember that often, banking records and trading accounts are online and if one closes out the Read more