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Subjecting taxpayers to IRS audits

On Behalf of | Apr 3, 2015 | Tax Audits

Georgia taxpayers may be interested in learning more about critical errors that could place them in a compromising position with the IRS. Generally speaking, the IRS has up to three years to audit a taxpayer after a return is filed. If the taxpayer underreports their income by at least 25 percent, the IRS may extend the audit period to six years. The same rule applies to taxpayers who have understated at least $5,000 in foreign income.

The auditing period begins on the filing date or the due date, whichever occurs later. When the taxpayer does not file a return, the auditing period is indefinite. The IRS keeps open cases on tax fraud, criminal violations and unfiled returns. Still, the practical limit for most of these cases is based on the extended 6-year auditing period. Taxpayers who have failed to submit certain documents could be subjected to IRS audits that scrutinize records produced over a decade ago.

Innocent mistakes may also subject taxpayers to an unlimited IRS audit. An unsigned tax return may leave a taxpayer susceptible to an open-ended audit because the federal agents do not consider the document to be a completed return. The same standards may apply to any documentation that has been altered by the taxpayer. Anyone who fails to disclose the appropriate forms documenting an investment in a foreign corporation may have an audit opened against them for an indefinite period of time.

Taxpayers who need help negotiating with the IRS might benefit from confiding in a lawyer. Legal counsel may be prepared to review their financial circumstances and correspondence with IRS agents to formulate a plan for resolving the existing issues. Legal counsel may also act as an intermediary who works to reach a settlement agreement with the IRS agents managing the tax audit.