Thursday, October 08, 2009

Even the IRS Has Time Limits

I am always writing about how important it is for taxpayers to know their rights, and one of the biggest defenses they have against the IRS is the statute of limitations. So when I saw this detailed explanation of the statute of limitations on I knew I should share it with my readers. Check out their article below.

If you are a fan of Law & Order as I am, you may have a negative reaction when a suspect claims the law can't touch him because of the statute of limitations. By relying on a technicality that hinges on the mere passage of time, it's almost as if the suspect is admitting he did it.

In any tax dispute, you'll want to make good substantive arguments. Still, don't discount the importance of the statute of limitations.

If you face a tax audit and can legitimately point to the statute of limitations to head off trouble and expense, you should. Why should you have to prove you were entitled to a deduction (or have to find and produce yellowed receipts) if it is simply too late for the IRS to make a claim?

Given the importance of the statute--both to heading off audit trouble and to knowing when you may be able to throw some of those receipts away--it is surprising how few taxpayers are statute savvy.

Fortunately, in this part of the tax law, the rules for corporations, partnerships, nonprofit organizations and individuals are consistent. Here's what you need to know.

Normally, the IRS Has Three Years

The overarching federal tax statute of limitations runs for three years after you file a tax return. If your tax return is due April 15, but you file early, the statute runs exactly three years after you file. If you file late and do not have an extension, the statute runs three years following your actual (late) filing date.

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