IRS Can Only Go Back 3 Years, Right? How About 10 Years Or Forever

Robert W. Wood for Forbes writes: In most cases, the IRS has three years to audit you after you file your return. If the IRS shows up after that, you may be able to say the statute of limitations has run. It’s better than hunting for receipts.

But many special rules can extend the purgatory. The three years is doubled to six if you omitted more than 25% of your income. It’s also doubled if you omitted more than $5,000 of foreign income. Even worse, the IRS has no time limit if you never file a return.

Once taxes are assessed, whether on your tax return or by the IRS in a notice, there’s a different time limit on IRS collections. That collection period is normally 10 years. But in one recent case, the IRS was able to be back 30? In Beeler v. Commissioner, the Tax Court held Mr. Beeler responsible for 30 year-old payroll tax penalties. That may sound crazy, but sometimes, the IRS has a memory like an elephant. And it can come down like an elephant on top of you, too.

Section 6672 of the tax code puts a 100% penalty on responsible persons who fail to withhold, or who withhold but fail to hand it over to the IRS. What’s more, this penalty can be assessed against more than one responsible person. IRS can collect only once, but it can come after them all and see who coughs up the money first.   [snip]   The article continues @ Forbes, click here to continue reading....