When It Comes to Your Taxes, Don’t Follow Trump’s Example
Donald Trump has yet to release his tax returns. Though he has admitted to being audited consistently for the past 10 years or so. And according to a recent Forbes article, even the IRS Commissioner John Koskinen is weighing in on Trump’s failure to release his taxes acknowledging that it’s okay to release his returns during an audit.
The big question here is whether or not ordinary taxpayers can learn anything from this ordeal. As the Forbes.com piece says, “You bet.” They offer the following tips, which I agree with.
Monitor Your Audit Exposure
The IRS normally gets three years to audit. In some circumstances–including where you under-report your income by more than 25%–the IRS gets six years. Tax lawyers and accountants monitor this exposure, and so should you. Watch the calendar until you are clear of audit. The statute usually begins to run when you file your return. But if you file early (say March 1), the three years runs from the due date (April 15).
Statute Never Runs
In some cases, the statute of limitations never runs. If you don’t sign your return, it’s not considered a valid tax return. Also, if you alter the penalties of perjury language, the return doesn’t count. What if the IRS never receives your return? The rule that timely mailing is timely filing doesn’t apply if the return never arrives at the IRS. For that reason, you’ll not only want proof you sent it but proof the IRS received it. See IRC § 7502(c).
The IRS may contact you (usually about two and a half years after you file), asking you to extend the normal three-year statute. The IRS will send you a form asking you to sign and return it. Taxation Solutions advice is to seek out representation from an Enrolled Agent and/or Tax Attorney before signing this extension to better know your rights and the true consequences of this extension.
Some taxpayers say “no” or ignore the request. Either way that usually leads the IRS to send a notice assessing extra taxes based on whatever information the IRS has.