ExpertMedium1 markMultiple Choice
CPA · Question 05 · Area 1: Ethics & Procedures
Taxpayer A filed their Year 1 tax return on April 15, Year 2. The return omitted ,000 of gross income, which exceeded 25% of the gross income stated on the return. No fraud was involved. What is the latest date the IRS can assess additional tax?
Taxpayer A filed their Year 1 tax return on April 15, Year 2. The return omitted ,000 of gross income, which exceeded 25% of the gross income stated on the return. No fraud was involved. What is the latest date the IRS can assess additional tax?
Answer options:
A.
April 15, Year 5
B.
April 15, Year 8
C.
April 15, Year 9
D.
There is no statute of limitations.
How to approach this question
Determine the applicable statute: Standard (3 years), Substantial Omission >25% (6 years), or Fraud/No Filing (Unlimited). Calculate from the later of the due date or filing date.
Full Answer
B.April 15, Year 8✓ Correct
IRC §6501(e) provides a 6-year statute of limitations if the taxpayer omits gross income in excess of 25% of the gross income stated on the return.
Common mistakes
Applying the 3-year rule or thinking it's unlimited (fraud).
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