Tax Lawyers Minneapolis

IRS Statute of Limitations: Tax Collections

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The statute of limitations limits the time for the IRS tax collection activities. Generally, there is a ten-year statute of limitations for the IRS collection of owed taxes. Thus, for assessments of tax or levy made after November 5, 1990, the IRS cannot collect or levy any tax ten years after the date of assessment of tax or levy. See 26 U.S.C. §6502(a)(1). Court proceedings must also be started by the IRS within the 10 year statute of limitations. Treas. Reg. Section 301.6502-1(a)(1).

For assessments of tax or levy made on or before November 5, 1990, the IRS cannot either collect or levy any tax six years after the date of assessment of tax or levy. See 26 U.S.C. §6501(e). However, if the six-year period ends after November 5, 1990, the statute of limitations is extended to ten years. Hence, in order to come under the six-year statute of limitations, the six-year period must end prior to November 5, 1990.

The ten-year statute of limitations can be extended by agreement between the taxpayer and the IRS, provided that the agreement is made prior to the expiration of the ten-year period. See 26 U.S.C. §6501(c)(4).

Thus, in figuring out the applicable statute of limitations, you must understand: the starting date for the running of the statute of limitations, any exceptions to the tolling of the statute of limitations, the last day that the IRS can audit a tax return, and the last day that the IRS can collect overdue tax on a tax return.

Sherayzen Law Office can help you understand all of these issues and represent your interests in your negotiations with the IRS.

Call NOW to discuss your case with a tax lawyer!

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!

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!

Importance of Determining Your Tax Filing Status

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Figuring out your filing status is the first major step in filing your tax return. Your tax filing status not only will allow you to determine the correct tax (from the Tax Computation Worksheet or appropriate column in the Tax Table), but also it is crucial to understanding your eligibility for and the exact amount of deductions, exemptions, tax credits. For example, in some situations, if your taxable income is close to $160,000, the choice between filing as “single” and filing as “married filing separately” may influence whether you need to pay the alternative minimum tax (“AMT”); it is more likely that filing as “single” will help you avoid AMT, while “married filing separately” status may have the opposite effect. Sometimes, the latter tax filing status may also make you ineligible for certain tax credits even at a much lower income bracket – a situation that may be avoided if you are filing joint tax return with your spouse.

There are five possible tax statuses: 1) single; 2) married filing jointly; 3) married filing separately; 4) head of household, and 5) qualifying widow(er) with dependent child. The benefits and drawbacks of each status differ greatly depending on a tax situation. In some cases, you may be eligible for more than one status (for example, single and head of household); in other cases, your eligibility may be greatly influenced by the choices you make.

In order to draw out the benefits and avoid costly mistakes, careful tax planning is necessary. The Internal Revenue Code (“IRC”) is so complex that it requires a tax professional to fully understand its provisions. Tax attorneys are professionals who usually are in a much better position to legitimately utilize possibilities offered by the IRC.

Sherayzen Law Office is a law firm that offers individual and business tax services. We can help you understand your current tax position, file the tax returns for you, and carefully plan your tax strategies for the future. CALL NOW to start resolving your tax issues!

First-Time Homebuyer Tax Credit: Deadline Extension

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Under the Homebuyer Assistance and Improvement Act of 2010 (enacted on July 2, 2010), eligible homebuyers who entered into a binding purchase contract on or before April 30 to purchase a principal residence can now close on a home by September 30, 2010 in order to qualify for the First-Time Homebuyer Credit. Thus, under the new law the closing deadline for eligible homebuyers is extended from June 30, 2010 to September 30, 2010.

Here are some useful definitions and facts:

*First-Time Homebuyer: the homebuyer and his spouse (if he is married) must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.

*Long-Time Resident Homebuyer: the settlement date must be after November 6, 2009 and the homebuyer and his spouse (if he is married) must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.

*Maximum Credit for a First-Time Homebuyer: $8,000.

*Maximum Credit for Long-Term Resident Homebuyer: $6,500.

*Claiming Credit – Method: must be done on paper return and using Form 5405, along with all required documentation, including a copy of the binding contract.

*Claiming Credit – 2010 qualifying purchase: If a 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009 (the returns must be printed out and sent to the IRS, along with all required documentation). If a 2009 tax return has already been filed, claim it on an amended return using Form 1040X. Whether or not a 2009 return has been filed, wait until next year and claim it on a 2010 Form 1040.