When it comes to audits by the Internal Revenue Service, some Georgia taxpayers may fear that they will be audited. Forgetting to file certain IRS forms is a common way to trigger an audit.
In many cases, the IRS has the authority to audit up to six years of taxpayers’ records, not three years as some may think. For instance, for taxpayers who fail to report more than a quarter of their income, the agency will double the usual three years to six years.
Taxpayers who own a portion of a foreign corporation may likely face an audit if they fail to file important forms, such as IRS Form 5471. In fact, filers will likely be penalized with fines that typically cost $10,000 per form if they neglect to file Form 5471.
In regards to the statute of limitations, the IRS can override the usual amount of time in some cases. For instance, if a taxpayer does not file the mandatory Form 5471, the IRS can keep the taxpayer’s complete tax return open indefinitely for an audit. This means that the IRS can examine and assess a person’s taxes on items associated with the omitted Form 5471 until the taxpayer files the form.
Because most taxpayers do not have a full grasp on the complex set of tax laws, the prospect of an IRS tax audit can seem daunting. However, a knowledgeable tax attorney could speak on behalf of a taxpayer in an attempt to work out a settlement with the IRS.