According to CBS News, filing your tax returns could raise the question of how long you should keep them, just in case the IRS decides to audit. If you come across this issue, it is important to be aware of the three types of the statute of limitations. This is found under the Internal Revenue Code, provided by Section 6501.
The first is a three-year statute of limitation on tax audits. Filing a tax return on the extension has the downside of also extending the time your return is subject to an audit. For example, filing a tax return for 2011 on April 15, 2012, would give the IRS exactly three years to audit it. However, if you request an extension and file on Oct. 15, 2012, the IRS will still receive exactly three years after that date to audit your return. The tax audit representation can be done by self and with the help of tax attorney or IRS lawyers. Most of the time the taxpayer find IRS to be frightening, frustrating, time-consuming, intimidating when they seek tax relief, this is one of the major reason for hiring a tax attorney.
Section 6501 also states the second statute of limitations. Overestimating your cost basis or holding securities for a long period of time could bring forth underreported income. This could result from taxpayers neglecting a gross income that surpasses 25 per cent of what was originally stated. In this case, the three-year limit is doubled to six years.
Assessing a tax return has no time limit if a return is false or fraudulent according to the third statute of limitations. This will also occur if no tax return is filed at all.
Having a good understanding of these three bills as well as an effective tax attorney can prevent future questions or frustrations with filing tax returns.
Tax problems? Call us today for a free consultation. We are a team of Lawyers, CPA’s and Enrolled agents who Specialized Exclusively in Tax Audit Representation with over 15 years of experience. We are located in Beverly Hills, California. Our services are nationwide. We work with all IRS offices throughout the nation. Because the IRS is a Federal Agency, we can request your case to be transferred to a local IRS office (Los Angeles, California).