Chapter 12, Problem 8P

a.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The statute of limitation applies to the taxpayer would end on.

Answer to Problem 8P

The statute of limitation applies to the taxpayer up to April 15, 2023.

Explanation of Solution

The statute limitation is the gap between a return filing date and a date to modify its return for a refund claim or for charging additional taxes from the taxpayer by the IRS. In practice, it is 3 years of the filing date of a tax return, without considering any extensions or 2 years from the deposition of taxes by the taxpayer. Tax laws provide for certain exceptions to this provision as under:

• In case the return is not filed or the return is filed fraudulently, this provision does not apply. IRS will collect any tax deficiency later without any time limit.
• In case a taxpayer forgoes an amount exceeding 25 percent of the shown gross income in the tax return, then the time limit will become 6 years.
• For bad-debt deduction and valueless securities deduction, the time limit will increase to 7 years.

Also on mutual agreement taxpayer and IRS may decide any extended date for this provision and this extension can only be sought if the date of this provision is close to expiring and the audit is yet to complete. When IRS finds any tax deficiency it may collect this amount in 10 years from the assessment date.

In the given situation, the 2018 individual tax return was filed on April 15, 2020, fraudulently. In this case, the statute of limitation applies to the taxpayer up to April 15, 2023.

Therefore, the statute of limitation applies to the taxpayer up to April 15, 2023.

b.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The statute of limitation applies to the taxpayer would end on.

Answer to Problem 8P

The statute of limitation applies to the taxpayer up to May 19, 2023.

Explanation of Solution

The statute limitation is the gap between a return filing date and a date to modify its return for a refund claim or for charging additional taxes from the taxpayer by the IRS. In practice, it is 3 years of the filing date of a tax return, without considering any extensions or 2 years from the deposition of taxes by the taxpayer. Tax laws provide for certain exceptions to this provision as under:

• In case the return is not filed or the return is filed fraudulently, this provision does not apply. IRS will collect any tax deficiency later without any time limit.
• In case a taxpayer forgoes an amount exceeding 25 percent of the shown gross income in the tax return, then the time limit will become 6 years.
• For bad-debt deduction and valueless securities deduction, the time limit will increase to 7 years.

Also on mutual agreement taxpayer and IRS may decide any extended date for this provision and this extension can only be sought if the date of this provision is close to expiring and the audit is yet to complete. When IRS finds any tax deficiency it may collect this amount in 10 years from the assessment date.

In the given situation, the 2018 individual tax return was filed on May 19, 2020. In this case, the statute of limitation applies to the taxpayer up to May 19, 2023.

Therefore, the statute of limitation applies to the taxpayer up to May 19, 2023.

c.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The statute of limitation applies to the taxpayer would end on.

Answer to Problem 8P

The statute of limitation applies to the taxpayer up to February 12, 2023.

Explanation of Solution

The statute limitation is the gap between a return filing date and a date to modify its return for a refund claim or for charging additional taxes from the taxpayer by the IRS. In practice, it is 3 years of the filing date of a tax return, without considering any extensions or 2 years from the deposition of taxes by the taxpayer. Tax laws provide for certain exceptions to this provision as under:

• In case the return is not filed or the return is filed fraudulently, this provision does not apply. IRS will collect any tax deficiency later without any time limit.
• In case a taxpayer forgoes an amount exceeding 25 percent of the shown gross income in the tax return, then the time limit will become 6 years.
• For bad-debt deduction and valueless securities deduction, the time limit will increase to 7 years.

Also on mutual agreement taxpayer and IRS may decide any extended date for this provision and this extension can only be sought if the date of this provision is close to expiring and the audit is yet to complete. When IRS finds any tax deficiency it may collect this amount in 10 years from the assessment date.

In the given situation, the 2018 individual tax return was filed on February 12, 2020. In this case, the statute of limitation applies to the taxpayer up to February 12, 2023.

Therefore, the statute of limitation applies to the taxpayer up to February 12, 2023.

d.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The statute of limitation applies to the taxpayer would end on.

Answer to Problem 8P

The statute of limitation applies to the taxpayer up to March 01, 2026.

Explanation of Solution

The statute limitation is the gap between a return filing date and a date to modify its return for a refund claim or for charging additional taxes from the taxpayer by the IRS. In practice, it is 3 years of the filing date of a tax return, without considering any extensions or 2 years from the deposition of taxes by the taxpayer. Tax laws provide for certain exceptions to this provision as under:

• In case the return is not filed or the return is filed fraudulently, this provision does not apply. IRS will collect any tax deficiency later without any time limit.
• In case a taxpayer forgoes an amount exceeding 25 percent of the shown gross income in the tax return, then the time limit will become 6 years.
• For bad-debt deduction and valueless securities deduction, the time limit will increase to 7 years.

Also on mutual agreement taxpayer and IRS may decide any extended date for this provision and this extension can only be sought if the date of this provision is close to expiring and the audit is yet to complete. When IRS finds any tax deficiency it may collect this amount in 10 years from the assessment date.

In the given situation, the 2018 individual tax return was filed on March 01, 2020, omitting $15,000 income and shown $50,000 gross income in the tax return. In this case, the statute of limitation applies to the taxpayer up to March 01, 2026, that is 6 years as the omitted amount is over 25 percent of the gross income shown.

Therefore, the statute of limitation applies to the taxpayer up to March 01, 2026.