Irs Tax Credit Rules
March 26th, 2008
Question: I’m going through an IRS Audit and I was wondering if there were any statue of limitation on back taxes.?
I’m being Audited for 2005 just now because I didn’t file until 2007. But I thought they only had 2 years to bring up a case on back taxes. They are also looking at opening 2006 and 2007. They are asking for an explanation for every deposit into my bank account and any unexplained (excess over what was 1099ed) will be counted as income. This is for 2005 and most of the deposits were from Home Equity Lines of Credit. They were loans and not income. My tax preparer erronously filed my return as a Real Estate Professional, but I was a Loan Officer and 90% of my income was from doing loans and not off of income properties… Since I made over $150k I don’t get to use any real estate losses as deductions for that year or 2006.
Anyone know the rules here?
Answer: The ordinary statute of limitations is three years from the date the return was filed. If you under-report your income by 25%, the statute of limitations is extended to six years. If there is fraud, there is no statute of limitations.
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