HOW long do you have to keep tax records? How long can the IRS audit your tax returns?
Let’s discuss tips on statute of limitations so you can clean your garage this weekend.
1. The general statute to audit you is three years after the return is filed.
2. The statute is extended to six years if you omit 25% of your gross income.
3. The statute to collect what has been established to be your tax liability is 10 years.
4. A personal tax return that is filed earlier than the deadline of April 15 is considered filed on April 15. For example, a 2016 return filed on February 15, 2017, is considered filed on April 15, 2017 with a statute expiration of April 15, 2020.
5. A personal tax return that was extended and filed on October 15, 2017 is considered filed on that same date with statute expiring on October 15, 2020. (TIP: If you have some sensitive issues that you don’t want disturbed, file on time so as not to give the IRS and extra six months to snoop around).
6. There is no statute if you do not file a return. They can audit you anytime—even after three or six years after filing deadline. The three years starts only after a timely filing.
7. There is no protection from the statute if the IRS does not receive your tax return. There is no protection even if you filed a return but the IRS did not receive or claims not to have received your return!
8. Mail via certified or registered mail especially if your return contains some critical income or deductions.
9. There is no statute for false or fraudulent returns. Sorry.
10. If you want statutes to protect you but are not ready to file, file anyway. File a processable return that bears your signature. Provide sufficient data for the IRS to ascertain and assess your tax liability. Remember that your return does not need to be perfect. Just show an honest and genuine attempt to comply with the law. This is my message to non-filers who have not filed because of incomplete records.
Beware: If the IRS identifies you as a non-filer and you do not file after their demands, they can file a substitute return for you. Believe me, that return will be estimated on the high side; pardon me, on the very high side, resulting on a tax due approaching 200% of what you actually owe. Add penalties and interests and, Houston, you have a problem.
* * *
Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
* * *
He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].