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I have a hypothetical question; a person does not report all of their
income in a federal tax return, how many years must go by before the
federal statute of limitations goes into effect? If a statute of
limitations does apply, to what does it apply ? For example, can
someone no longer be charged with filling a false return, is this
person no longer liable for the past due tax and penalties?
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noSun4Me <albakourt@yahoo.com> writes:
I have a hypothetical question; a person does not report all of their
income in a federal tax return, how many years must go by before the
federal statute of limitations goes into effect?
It depends :).
After three years but less than six years from filing, the IRS
can only open the return if it can make a showing that income
was underreported by 25% or more (I don't know the standard of
proof they need to meet). After six years, the IRS can only
open the return if it can make a showing of tax fraud (again, I
don't know the standard of proof they need to meet).
--
Rich Carreiro rlc-news@rlcarr.com
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On Mar 24, 4:39=A0am, noSun4Me <albako...@yahoo.com> wrote:
I have a hypothetical question; a person does not report all of their
income in a federal tax return, how many years must go by before the
federal statute of limitations goes into effect? If a statute of
limitations does apply, to what does it apply ? For example, can
someone no longer be charged with filling a false return, is this
person no longer liable for the past due tax and penalties?
Statute of Limitations: (Civil and Criminal Proceedings)
For civil tax fraud (i.e. unreported income), there is no
statute of limitations (the tax can be assessed at any time).
For criminal tax evasion (i.e. unreported income), the
criminal statute of limitations is only on the prosecution of the
crime i.e. tax evasion (not the assessment of tax owed).
When the prosecution is for the offense of willfully
attempting in any manner to evade or defeat any tax, the
limitation is six years (i.e., unreported income). The
Federal Criminal Code contains a general limitations period
for prosecutions under Title 18, U.S.C.A., of five years after
the commission of the crime.
Other offenses arising under the Internal Revenue laws
generally have a three-year period of limitation for
prosecution. [IRC =A76531(1)]
The government may first, collect civil penalties and
tax, get discovery information via civil proceedings that
would be illegal under criminal proceedings (Fifth
Amendment), then begin criminal proceedings, and use
the civil file to prosecute.
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On Mar 24, 7:39=A0am, noSun4Me <albako...@yahoo.com> wrote:
I have a hypothetical question; a person does not report all of their
income in a federal tax return, how many years must go by before the
federal statute of limitations goes into effect? If a statute of
limitations does apply, to what does it apply ? For example, can
someone no longer be charged with filling a false return, is this
person no longer liable for the past due tax and penalties?
GREAT Question - here's the scoop:
The normal statute of limitations is three years. During this period
the taxpayer has the burden of proof for everthing on their return.
Virtually everything is fair game during this period.
The next statute of limitations is six year (including the original
three). During this time period the IRS must accept the burden of
proof. There are also a few other odd rules - one being that they
must be able to prove that your income was understated by a
statutorily defined amount. I believe this is 20% of what was
required to be reported. So if you reported $100K, but should have
reported $120K, then you understated income by 20% and the IRS can
extend the statute of limitations to six years.
The next statute of limitations is VERY nasty. IF (and this is a BIG
if) the IRS argues fraud then there is NO statute of limitations.
Here's the catch - fraud is hard to prove because it includes the
element of intent. You had to INTEND to cheat the government out of
their money in order for fraud to come into play. And you should know
that there are two types of fraud - criminal and civil. The IRS can
try to invoke either or both of these. Just because they charge civil
fraud doesn't mean you did anything criminal - criminal fraud carries
jail time, civil does not.
You should also know that it is very difficult to correct a fraudulent
return. If you file a fraudulent return AND then file an amended
return before the original due date for that return THEN, and only
then, can you correct the fraud. If you file a fraudulent return and
then file an amended return AFTER the due date, and pay any taxes and
interest due with the amended return, the IRS can still come after you
for civil fraud penalties whenever they like.
Good luck,
Gene E. Utterback, EA, RFC, ABA
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Tue, 25 Mar 2008 05:37:18 -0400 from eagent <gene@alliancetax.com>:
The next statute of limitations is six year (including the original
three). During this time period the IRS must accept the burden of
proof. There are also a few other odd rules - one being that they
must be able to prove that your income was understated by a
statutorily defined amount. I believe this is 20% of what was
required to be reported. So if you reported $100K, but should have
reported $120K, then you understated income by 20% and the IRS can
extend the statute of limitations to six years.
I would hope a judge would not accept such arithmetic.
If you reported $100K but should have reported $120K, you
underreported by $20K/$120K = 16.67%, not 20%.
Presumably your lawyer will be smart enough to raise such an
argument.
--
If you e-mail me from a fake address, your fingers will drop off.
I am not a lawyer; this is not legal advice. When you read anything
legal on the net, always verify it on your own, in light of your
particular circumstances. You may also need to consult a lawyer.
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com
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