The IRS Audit Blog

Posts Tagged ‘IRS Audit’

Question: How long does the IRS have to come after you if you did not file a return at all?

My fiance did not file his tax returns before he met me and I started making him do it. The last one he did not file was for the 2005 tax year, he would have gotten a refund anyway, so he doesnt owe anything. Is there a risk that we may get audited at some point later in our life and he would face penalties? Does the IRS have only a certain number of years to make a claim or can this come up at any point in our life? Thank you

Answer: The IRS has 3 years from the filing deadline or when the return is filed, whichever is later, to assess any tax. Technically an open tax year is open forever. However the IRS does not go back more than 6 tax years where a return was not filed as a matter of standard policy so basically anything from 2001 to the present that is unfiled is open for assessment and 2000 and earlier is effectively closed.

Most taxpayers have a refund coming and if that’s what it looks like the IRS will not act at all. They’ll happily keep your refunds if you don’t file within 3 years of the filing deadline. So, tax year 2004 closes for refunds tonight at midnight and tax year 2005 still has a year to go on it.

There are no penalties for late filing as long as you don’t owe any tax when you file so there’s no worries there. However the IRS will still have 3 years from the date the return is actually filed to audit it.

They don’t audit returns merely because they’re filed late. The vast majority of audits are for a single item or class of items on your return. Such as a specific charitable donation, or charitable donations in general, for example.

Few Loopholes in New Payment Rules?

In today’s Federal Register, USDA published final regulations disqualifying wealthy farmers from receiving government payments and redefining the “actively engaged in farming” rules that outlaw passive investors and silent partners from collecting farm benefits, as DTNAg Policy Editor Chris Clayton reported.

How To Bluff Your Way Through an IRS Audit

IRS Made Trade-offs in Implementing Recovery Act

The Internal Revenue Service needed to scramble to implement various provisions of last year s Recovery Act to boost the economy as quickly as possible, but it now has to improve its enforcement and reporting to safeguard against abuses, according to a government report.

Cobra vs. G.I. Joe and United States – The Vortex

The drop dead date to apply to the IRS Voluntary Disclosure Program was October 15th, however U.S. taxpayers still can file a voluntary disclosure under the IRS normal procedures.

In 2009, the IRS and U.S. Department of Justice commenced its highly publicized investigation into Swiss bank UBS AG and U.S. accountholders who failed to inform them of these assets. However, the investigation did not end with UBS. The IRS has made it very public that offshore tax evasion remains a top enforcement priority. The Department of Justice has gone after taxpayers regardless of the amount even taxpayers with assets of $20,000 or less in offshore accounts.

U.S. taxpayers with offshore assets and accounts are required to disclose these interests to the U.S. government on their Form 1040, U.S. Individual Tax Returns, and file a corresponding Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). If IRS agents find out that a taxpayer has not disclosed an interest in an offshore account or income accruing on such accounts during the course of an audit, the IRS may impose harsh penalties including the greater of $100,000 or 50% of the offshore account balance for willful failure to file an FBAR for each account. These penalties, compounded with interest and fraud penalties, can essentially wipe out the taxpayers foreign assets. To make matters worse, taxpayers could be exposed to criminal prosecution and jail time for tax evasion.

In March 2009, to prod taxpayers to come forward and disclose previously undisclosed offshore accounts in exchange for minimal penalties and the promise not to refer the case for criminal prosecution, the IRS announced the creation of the IRS Voluntary Disclosure Program. As a result of pressure on UBS and other offshore institutions, thousands of U.S. taxpayers with previously undisclosed offshore accounts took advantage of the Voluntary Disclosure Program and joined before the October 15, 2009 deadline.

Despite the fact that it is too late to enter the IRS Voluntary Disclosure Program, the option to file a voluntary disclosure under the IRS normal procedures is still available. There are a plenty of advantages to filing a voluntary disclosure as it is far better to disclose to the IRS than to have the IRS discover you. As is with the Voluntary Disclosure Program, a traditional voluntary disclosure can provide taxpayers with previously undisclosed foreign accounts with a way out possibly avoiding the most severe of civil fines and criminal prosecution.

In addition, those U.S. taxpayers with undisclosed offshore bank accounts should be made very aware that the voluntary disclosure process is a comprehensive and delicate one as with all dealings involving the IRS. Extreme care must be taken in deciding on whether to file a voluntary disclosure or not. U.S. taxpayers are highly encouraged to get in touch with a tax attorney experienced in resolving disputes with the IRS as soon as possible.

For example, if a taxpayer has already been investigated and contacted by the IRS, it may be too late to file a disclosure. Therefore, time definitely plays a significant factor as the IRS continues its pursuit of undisclosed offshore account holders. The window of opportunity is closing on those who do not come forward and file to take advantage of possible reduced penalties and potential prison time. Again,it is advised that U.S. Taxpayers with undisclosed offshore accounts seek the advice of and direction of legal counsel on the matter.

If you’re audited, let the pros handle it

By Edward J. Loughrey The representative must have a Form 2848, Power of Attorney (POA) document, signed by the client that he/she will submit to the auditor. This will enable him/her to discuss all matters pertaining to the tax audit. This POA is limited to only to the tax issues at hand.

Ultimate Tax Deduction Solution to our Exploding Deficit

Question: The IRS audited me last year, all okay now. I just was notified that a certified letter is at the post office.

Any ideas? I just checked “Where’s my refund” and it is scheduled for a date in March.

Answer: Usually, when the post office provides you the certified mail notification, there is usually the person or organization listed from whom it is coming..

Now, since you were audited in the past, there is a good chance you will be audited in the future (you are considered a high risk).. Since you are receiving a certified letter, if it is from the IRS, this is serious.. Hopefully, you did nothing questionable or illegal on past tax returns..

Just to educate you real quick, I will provide you information on the three kinds of IRS audits:

1 – correspondence audit or OOPS, did you overlook something audit.. This letter is usually sent via regular mail, but also is sent certified mail as well.. Basically, they have conflicting information in their records compared to you.. If it is something which can be fixed by showing proof via a form or correction, they are not too concerned.. You should not be either..

2 – Office audit — the IRS will ask you to come to their local IRS office and request documentation from you regarding certain expenses or deductions.. Once again, while this is more serious than the correspondence audit, it is really nothing to be too concerned.. You should take along any relevant tax preparer or CPA who helped you prepare this..

3 – Field audit — If this is the case, you should seek out a tax attorney immediately. These are the worst and most far reaching of them all.. This is also called a “blood audit”.. Basically, they want blood because they know you have materially and willing fully misstated the facts on your tax return…

Just go by and pick up the certified letter.. Not picking it up means the problem will escalate and get worse.. Who knows.. you might be receiving a check from someone..

Hope that helps..

Avoid An Audit: 6 “Red Flags” You Should Know

If history is any indicator, less than 1% of Americans will be audited by the Internal Revenue Service in the coming year.

Audit Reconsideration

Question: A deposit of $10K+ into my banking account – does that lead to an automatic audit?

I’ve been living abroad for 7+ years, dutifully filing my US taxes each year, and am now repatriating back to the US. I want to transfer all my money to a US account (more than $20K). Would this trigger an audit?

I heard that any transactions made for $10,000.01 or more automatically triggers an audit from the IRS? Is this true?

The last thing I want/need while moving back home is to deal with the IRS!

Answer: NO. Anything over 10k in CASH will result in your financial institution filing a report with the FBI. (It is called a CTR – Currency transaction report). They just keep an eye on you then for a little bit, but still it is not an audit. They will want to know your info, where you work and that is about it. Then if they KEEP getting that report and you don’t own a business or have any other reasonable reason for you to be depositing that sort of CASH, there will be some questions they would want answered.

Nothing for you to worry about as long as you deposit a check or the BEST way would be via Bank Wire.

Bibby Financial Services Offers 10 New Year’s Resolutions For Small and Medium-Sized Businesses

The start of the new year is an excellent time for owners of small and medium-sized businesses to manage cash flow more efficiently so they can improve their performance. Bibby Financial Services, a leading provider of factoring and accounts receivable financing, is offering 10 New Year’s Resolutions geared at helping businesses achieve greater financial success. (PRWeb Jan 5, 2010) Read the …

IRS Bank Levy? Got an IRS Bank Levy? Here is what to do fi