IRS Audits

What is the name of your state? NY

A friend of mine suggested I visit this site. She has been on it several times and raves about it. We are currently enrolled in a Cost Accounting class. The subject matter today got around to IRS audits. Many people in the class, including my professor, had an opinion on how far behind the IRS is in doing audits. Some say a year, some two, one guy says he even heard from his dad that they are as far behind as 5 years.

I'm told there are a lot of tax attorneys, CPAs, and tax preparers who contribute to this site. From your own experiences, do any of you have an idea how far behind, if any, the IRS is?

Frankly, I could use the extra browny points Any information would be helpful.

Thank you.

It usually takes the IRS 2 years to catch an error. This time is shortened if you are claiming EIC or filing an amended return (1040X). If the IRS waits 5 years, they can't audit at all. The IRS has 3 years from the tax return's due date or filing date to assess a tax or they lose the power to assess a tax for that year. (There's an exception for fraudulent taxpayers.)

On 4/15, the IRS loses its chance to collect taxes for tax year 1999, unless the taxpayer filed an extension or filed the 1999 return after 4/15/2000.

Thanks!

Thanks for the answer, abezon. This ought to be worth some points. It counts as research points.

IRS Audit follow-up for abezon

After reading your reply and thinking I knew what it meant I began to get a little confused. Please bear with me. You stated in your reply, "If the IRS waits 5 years, they can't audit at all. The IRS has 3 years from the tax return's due date or filing date to assess a tax or they lose the power to assess a tax for that year. (There's an exception for fraudulent taxpayers.)"

My questions is why would the IRS audit in year 4 or 5 is they can only assess a tax within the 3-year period? If they wait 4 or 5 years that would be 2, or 1, year respectively that they couldn't collect tax. Is that correct?

Please explain. (Now you know why I'm struggling in Cost Accounting).

Again, thank you for helping.

Because the IRS will often make a decision that is wrong simply because the return ended up on one of the idiot-employee desks instead of on a competant employee's desk. I actually had a client who amended their tax return well before the 4/15 due date, only to have the IRS reject it because it wasn't filed by 12/31! Dead wrong, but some idiot thought that was the answer and didn't bother to check. Then I had to write a couple rude letters to get them to reverse their decision. grrr.

Anyway, the IRS doesn't just do the right thing -- they make a snap decision and defend it until your rub their noses in the tax code. Sometimes even that doesn't work & you have to go to tax court.

IRS Audits - question for abezon

abezon, I'm sorry to continue this discussion but I still don't understand something and I want to be able to "defend" my reporting in class. My professor hates to be wrong and right now I think he is. He especially goes totally ballistic if/when a woman asks or states anything, even in the way of a clarification, that he feels is some kind of challenge. I'm trying to avoid that happening to me.

With all respect to you, I'm still confused as to why the IRS would bother auditing 4 or 5 years later if they know they can't collect taxes after 3 years? Why make the effort? Why waste the time if they can't do anything about it?

I know I must be missing something that's critical to the issue here. Can you give me some simple examples that I could use? All information is appreciated.

Thanks again for taking the time to bother.

The IRS can reopen the statute of limitations beyond the 3 year limit if (1) the taxpayer owed taxes & paid them after the due date of the return, (2) the taxpayer filed an extension, or (3) the IRS can show that the taxpayer committed fraud during some tax year that is still open, & they have reason to suspect that this fraud has been going on for more than 3 years. Other than that, the IRS is stuck after 3 years.

Thanks, abezon. I think I finally have all my ducks in a line.

Oh so true!

abezon said: "Anyway, the IRS doesn't just do the right thing -- they make a snap decision and defend it until your rub their noses in the tax code. Sometimes even that doesn't work & you have to go to tax court."

OH SO TRUE!!!!!!

I finally beat the IRS in Tax Court after years of their harassment, threats, and insults. What a bunch of morons at the IRS!!