Amending Tax Returns

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Whether you need to amend your previously-filed tax return depends on your particular situation. In some situations, such as simple math errors, the IRS will correct the return for you. In other situations, however, you should file an amended tax return. The most common situations occur when you need to change your: filing status, dependents, income, deductions and credits.

If you are eligible to claim the first-time homebuyer credit for a qualified 2010 home purchase, you may wish to elect to amend your 2009 return in order to claim the credit this year without waiting for the next year to file the 2010 tax return.

You should use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. Be sure to check the box for the year of the return you are amending on the Form 1040X, Line B, or write in the year if you are amending a return filed in year prior to those listed on the form. If you are amending more than one tax return, you will need to prepare a 1040X for each return If the changes involve other schedules or forms, attach them to the Form 1040X.

If you are filing to claim an additional refund, you should wait until you have received your original refund before filing Form 1040X. However, if you owe additional tax for 2009, the opposite is true – you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

Whether you are able to claim a refund will depend on the applicable statute of limitations, but generally, you have three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.

Sherayzen Law Office can help you determine whether you need to amend your tax return and help you prepare Form 1040X with all attachments.

Call Sherayzen Law Office to discuss your tax situation with a tax attorney!

IRS Statute of Limitations: Taxpayer Audit

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The tax statute of limitations limits the time during which an action can be brought by the IRS for an audit. The general rule is that IRS has three years from the filing date to audit a tax return. 26 U.S.C. §6501(a) and Treas. Reg. §301.6501(a)-1(a). Similarly, under Treas. Reg. 301.6501(a)-1(b) no proceeding in court by the IRS without assessment for the collection of any tax can begin after the expiration of three years.

However, if the taxpayer fails to report on his tax return an amount in excess of 25% of the gross income (as stated on the filed tax return), then the statute of limitations is increased to six years. 26 U.S.C. §6501(e).

If the tax return was prepared by the IRS under the authority of section 26 U.S.C. §6020(b) the statute of limitations simply does not apply. See 26 U.S.C. §6501(b)(3). Likewise, the statute of limitations does not apply in the case of a false tax return or fraudulent tax return filed with the IRS with intent to evade any tax. See 26 U.S.C. §6501(c)(1).

This essay states only the general rules. The statute spells out numerous exceptions to these general rules. Therefore, even though most of the situations are resolved by the general rule, it is best to consult your tax attorney to see if your situation fits into one of the exceptions.

Call Sherayzen Law Office to discuss your tax situation with a tax attorney!

Business Tax Returns: The Advantages of a Tax Attorney Review

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A lot of businesses simply look at the tax returns as “adding numbers.” Yet, tax returns are so much more than that. A tax return is a result of a long series of decisions made by the business, such as elections, classifications, investment strategies, structuring of business transactions, and numerous other actions and inactions. Dealing with this interior constitution of a business tax return from a legal perspective (rather than from a more rudimentary accounting view) is the superior advantage of a business tax attorney.

The advantages of the legal approach to tax returns can be grouped in three classifications. First, an attorney will review a business tax return from a structural perspective, taking into account the temporal element of a business transactions (i.e. comparing the effect of a business strategy throughout different time periods – prior years and future projections) and non-tax business and legal goals. This structural overview is especially effective in advantageous positioning of a tax strategy into the overall legal structure of a business.

This first approach necessarily leads to the second advantage – a business tax attorney will explore an alternative treatment of a given business and/or tax issue and will strive to find a legal solution to a taxation matter. Armed with a deeper understanding of other legal and non-legal goals of a business client, a tax attorney may engage in re-classification of certain business transactions to take better advantage of the contemporary provision of the Internal Revenue Code. In certain situations, an attorney review may even result in filing amended tax returns for prior tax years in an attempt to recapture tax benefits (i.e. receive tax refunds), which were unavailable or overlooked in the past.

Finally, an overview of a business tax return by a business tax lawyer is likely to lead to comprehensive tax planning for the future. In some situations, an overview of a business tax return by a business tax lawyer will result in a recommendation of a complete re-structuring of business transactions in a more tax-advantageous matter while seeking to achieve the same business goals. In others, a business tax lawyer may implement tax deferment and tax reduction strategies centered around purely legal and tax concepts.

Whether your business is small or large, growing or maturing, local or international, retaining the services of a business tax lawyer to overview your business tax return should become your annual practice. The benefits of such overview are usually substantial. In addition to the direct advantages of a better current tax strategy and future tax planning, an overview of a business tax return by an attorney may lead to completely unexpected and important discoveries about the legal and tax situation of your business – the legal issues that were overlooked in the past, but could have grown into severe problems in the future had it not been for their timely discovery.

Sherayzen Law Office can help you review your business tax returns and create responsible and tax effective strategies for the current and future tax years. Call NOW to discuss your business tax return(s) with an international business tax lawyer!

IRS Statute of Limitations: Claiming a Tax Refund

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Generally, a taxpayer may file a claim for a tax refund of an overpayment of any tax within three years from the time the tax return was filed with the IRS or two years from the time the tax was paid to the IRS, whichever period is later. If no tax return was filed with the IRS, the claim may also be made within two years from the date that the tax was paid to the IRS. See 26 U.S.C. §6511(a).

The statute spells out numerous exceptions to this general rule. For example, pursuant to 26 U.S.C. §6511(d)(1), a taxpayer may file a claim within 7 years if the tax refund pertains to a bad debt under section 166 or 832(c) or in connection with a loss from a worthless security under section 165(g).

Therefore, even though the majority of situations are resolved by the general rule, it is prudent to consult your tax attorney to see if your situation fits into one of the exceptions.

Call NOW Sherayzen Law Office to discuss your tax situation with a tax attorney!

Effect of Legal Separation and Divorce on Your Ability to Claim “Single” Tax Status

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According to the IRS, in order to be able to claim “single” tax status, you must be “unmarried or legally separated from your spouse under a divorce or separate maintenance decree” on the last day of your tax year, and you do “not qualify for another filing status.” (See IRS Publication 501).

Determining your marital status can be a complex legal matter with numerous exceptions, and exceptions to exceptions. Only a tax professional who reviews the facts of your case may be in position to advise you on your marital status. Here, I will only attempt to sketch the broadest concepts to give you some awareness of the issues.

IRS may consider your marital status as “unmarried” if, on the last day of the relevant tax year, “you were unmarried or legally separated from your spouse under a divorce or separate maintenance decree.” Id. Usually, the state law will determine whether you were legally separated from your spouse on the last day of the relevant tax year. If you were divorced under a final decree by the last day of the year, the IRS will consider you unmarried for the entire year. However, if the divorce was motivated by the desire to file your tax return as unmarried persons, and you and your spouse remarry the next year, the IRS will disregard the divorce for tax purposes and demand that you and your spouse file your tax return(s) as married persons.

If your marriage is annulled (by a court decree which holds that no valid marriage ever existed), the IRS will consider you as “unmarried,” and you must amend your tax returns for all years (within the Statute of Limitations – usually the past three tax years) affected by the annulment.

Keep in mind that, if you are able to claim “single” status, you may also be eligible for a more advantageous tax filing status, such as “head of household” or “qualifying widow(er) with a dependent child.”

Call Sherayzen Law Office to discuss your tax filing status with an attorney!