You have the right to know:
- The maximum time you have to challenge the Internal Revenue Service and present additional documentation.
- The maximum amount of time the Internal Revenue Service has to audit each tax year.
- When the Internal Revenue Service has finished their audit.
The Internal Revenue Service normally has three years from the date that you filed your return to estimate or add an additional tax for that tax year.
There are some exceptions to the three-year limit, which includes the taxpayer’s failure to file returns for specific years or if a false or fraudulent return is filed. In these cases, the Internal Revenue Service has an unlimited amount of time to assess tax for that tax year.
The Internal Revenue Service usually has 10 years from the assessment date to collect unpaid taxes. This ten year period cannot be extended except for taxpayers who enter into installment agreements OR the Internal Revenue Service obtains a court judgment.
Usually, a taxpayer will only be subject to one audit per tax year. However, the Internal Revenue Service can reopen audits for previous tax years, if necessary. This happens if the taxpayer is believed to have filed a fraudulent return.
Some things that may lead to an audit include overstating charitable donations https://fasttaxhelp.org/avoiding-a-tax-audit/. Red flags for business returns include the research credit, the fuel tax credit, and boosting your business expenses.
To qualify for the research credit, a taxpayer’s research activities must include a process of experimentation using science with a goal of improving a product or process the taxpayer uses in its business or holds for sale or lease. There are certain activities specifically EXCLUDED by the Internal Revenue Service and those include research after commercial production, the adaptation of an existing business product or process, foreign research, and research funded by a customer. The Federal Government taxes gasoline, diesel fuel, kerosene, alternative fuels, and certain other types of fuels to power vehicles and equipment. Certain commercial uses of these vehicles and equipment used off-road may qualify for the tax credit and may include farm equipment, certain boats, trains, and airplanes.
Be careful not to exaggerate your business expenses. The short and simple definition from the Internal Revenue Service states, “to be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is appropriate for your trade or business. An expense does not have to be imperative or crucial to be considered necessary”.
For questions, please feel free to call us at 561-293-3135 or visit https://fasttaxhelp.org/fast-tax-help-form/. Our Tax Professionals have more than 25 years of experience and are ready to help you. For more information about this post contact the author at info@fasttaxhelp.org. We are A rated with the BBB.
