ExpertHard1 markMultiple Choice
CPA · Question 06 · Area I: Ethics & Tax Procedures
A taxpayer filed their Year 1 tax return on March 15, Year 2. The return omitted $6,000 of gross income. The total gross income reported on the return was $20,000. Assuming no fraud was involved, what is the latest date the IRS can assess additional tax?
A taxpayer filed their Year 1 tax return on March 15, Year 2. The return omitted $6,000 of gross income. The total gross income reported on the return was $20,000. Assuming no fraud was involved, what is the latest date the IRS can assess additional tax?
Answer options:
A.
March 15, Year 5
B.
April 15, Year 5
C.
April 15, Year 8
D.
March 15, Year 8
How to approach this question
1. Determine the start of the statute: Later of due date (April 15) or filing date. 2. Check for substantial omission (>25% of gross income). 3. Apply 3 or 6 years.
Full Answer
C.April 15, Year 8✓ Correct
C
The return was filed early (March 15), so the statute of limitations clock starts on the due date (April 15, Year 2). The omitted income ($6,000) is 30% of the reported gross income ($20,000). Since the omission exceeds 25% of gross income stated on the return, the 6-year statute of limitations applies (IRC §6501(e)). April 15, Year 2 + 6 years = April 15, Year 8.
Common mistakes
Starting the count from the early filing date (March 15) instead of the due date (April 15). Failing to check the 25% test.
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