Block on Trump's Asylum Ban Upheld by Supreme Court
Happily, tax audits are not happening as often as they used to. Internal Revenue Service budgets are diminishing, and audits are at an all-time low. But that's no reason for general counsel to rest on the tax watch.
Some of the most frequently asked tax questions are: how likely is my company to be audited and do we need a tax accountant? The answer is a twofer: yes, you need a tax accountant because the IRS can (and probably will) audit forever.
Statistically, corporations and partnerships have a 0.445 percent chance of being audited. That's an audit rate of 1 in 224, for those who are not accountants. For individuals and sole proprietors making more than $1 million before deductions, there's a 1 in 23 chance of being audited.
Despite budget cuts for audits in recent years, the IRS focuses on taxpayers who are traditionally non-compliant: small businesses, high-wealth clients, and other individuals susceptible to tax evasion. Think attorneys Michael Cohen and Paul Manafort. In other words, lawyers need tax accountants, too.
Large corporations, of course, can count on an audit every few years. Those with assets over $5 billion have their returns audited 1 in 3 times. Between $10 and $5 billion in assets, and your chances are 1 in 23. With numbers like that, your company has to budget for tax accountants.
But even if you or your company is likely to be audited, the good news is that there are statutes of limitations.
Typically, the IRS has three years after you file a tax return to audit. If you file before April 15, however, the statute runs after the due date -- not the filing date. If you get an extension to Oct. 15, the same rule applies. It's not a technicality; it's the law. There are exceptions, but that's why you may need a tax attorney.
If your return includes a "substantial understatement of income," the statute of limitations is six years. "Substantial understatement" generally means 25 percent of your actual income. However, the IRS has an unlimited number of years to audit if the agency concludes you intentionally understated your income.
That would be the forever audit, and also maybe why they say nothing is certain but death and taxes.
Sign into your Legal Forms and Services account to manage your estate planning documents.Sign In
Create an account allows to take advantage of these benefits: