The Tax Court Rules, You May Be Audited Upto 20 Years Ago

By Michael Lodge on January 31, 2024

Michael Lodge - The Business Advisor - 424.542.7299 - Title: IRS's Extended Reach: How the Statute of Limitations May Not Protect Taxpayers

A recent decision by the Tax Court has highlighted the extended reach of the Internal Revenue Service (IRS) when it comes to collecting taxes. Contrary to popular belief, the statute of limitations, which generally requires the IRS to make a tax assessment within three years from the return filing date, may not always protect taxpayers. Section 6501(c)(1) provides an exception to this rule in cases involving false or fraudulent tax return filings, allowing the statute of limitations period to remain open indefinitely.

The concept of the statute of limitations is rooted in fairness and finality, aiming to ensure that claims are brought within a reasonable period of time. However, the exception for false or fraudulent tax returns demonstrates the IRS's ability to extend its reach beyond the typical limitations period. This decision underscores the importance of understanding the nuances of tax law and the potential implications of filing inaccurate or fraudulent returns, as the IRS may have the authority to pursue taxes from roughly 20 years ago, as evidenced by the recent ruling. Taxpayers should therefore exercise caution and diligence in their tax filings to avoid potential repercussions from an extended statute of limitations.

This Article is an example of how the IRS may decide to go after taxpayers who have failed to file tax returns or have filed fraudulent ones. Cure the tax issue by filing an amended return for the year you may have in question.

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