Legal Question in Tax Law in Tennessee

Re: Auditing

In response to your question, I will give you every lawyer's favorite answer: "It depends." If you are asking about federal income taxes, the general rule is that the IRS three years from the date the return is filed to propose additional taxes. But there are many exceptions. For example, if there is a 25% understatement of gross income, the IRS has 6 years. And if there is fraud, there is no statute of limitations and the additional tax can be assessed at any time. Also, the statute of limitations referred to here starts to run when a tax return is filed, so if you don't file, the three year period never starts, and the IRS can come back and assess the tax at any time. And finally, there are special rules if the proposed adjustments to your returns related to adjustments of some "pass through" entity with which you were involved, such as a partnership or Subchapter S corporation. So the answer really does depend on the facts. Give us more complete facts, and we'll give you a better answer. For more information about dealing with IRS audits, please see my website at www.bjhaynes.com. I hope this information is helpful to you. B.J. Haynes, Attorney/CPA (Burke, VA)