Taxpayers are required to file an income tax return to report their taxable income by April 15th following the end of the calendar year and to pay any tax owed by this date. Under Section 6065, returns must be signed under penalty of perjury.
Most taxpayers can request an automatic six-month filing extension without justification by timely submitting Form 4868. If the tax due on the later filed return exceeds the estimated payment by no more than 10%, Treas. Reg. § 301.6651-1(c)(3)(i) indicates the IRS will not impose penalties, although interest on the underpayment from April 15th until payment is still owed.
If the return is accepted as filed, the taxpayer will receive a “no change letter.” If the IRS agent determines there has been an underpayment, a “30-day letter” with the proposed tax adjustment is issued, giving the taxpayer 30 days to request an IRS appeals process by filing a protest. For adjustments under $25,000, a simple letter request for appeals consideration suffices.
The appeals process involves a conference with an appeals officer to try and settle any issues, which can be attended by the taxpayer’s representative, possibly the taxpayer. This process is informal, without a transcript or evidence rules. A binding “closing agreement” under § 7121, or arbitration/mediation, may conclude the settlement.
If the taxpayer does not request an appeal within the allotted time or if the appeal does not lead to a settlement, the IRS will issue a “90-day letter,” a statutory notice of deficiency. The taxpayer then has 90 days from this letter’s issuance to file a petition with the Tax Court under § 6213 without paying the disputed tax, which also tolls the statute of limitations. Failure to file results in the IRS’s formal tax assessment after the 90-day period.
The IRS must make a formal tax “assessment” under § 6203 within the statute of limitations, typically three years from the return’s filing date or due date, barring extensions. If no return is filed, the statute of limitations does not apply, remaining open indefinitely. There are no limitations for fraud, and certain items have unique statutes of limitations apart from the general three-year rule. Formal assessment precedes any collection action, including property liens.
Overview of Tax Procedures (IRS Audits)
Editor: Cynthia Wu
Taxpayers are required to file an income tax return to report their taxable income by April 15th following the end of the calendar year and to pay any tax owed by this date. Under Section 6065, returns must be signed under penalty of perjury.
Most taxpayers can request an automatic six-month filing extension without justification by timely submitting Form 4868. If the tax due on the later filed return exceeds the estimated payment by no more than 10%, Treas. Reg. § 301.6651-1(c)(3)(i) indicates the IRS will not impose penalties, although interest on the underpayment from April 15th until payment is still owed.
If the return is accepted as filed, the taxpayer will receive a “no change letter.” If the IRS agent determines there has been an underpayment, a “30-day letter” with the proposed tax adjustment is issued, giving the taxpayer 30 days to request an IRS appeals process by filing a protest. For adjustments under $25,000, a simple letter request for appeals consideration suffices.
The appeals process involves a conference with an appeals officer to try and settle any issues, which can be attended by the taxpayer’s representative, possibly the taxpayer. This process is informal, without a transcript or evidence rules. A binding “closing agreement” under § 7121, or arbitration/mediation, may conclude the settlement.
If the taxpayer does not request an appeal within the allotted time or if the appeal does not lead to a settlement, the IRS will issue a “90-day letter,” a statutory notice of deficiency. The taxpayer then has 90 days from this letter’s issuance to file a petition with the Tax Court under § 6213 without paying the disputed tax, which also tolls the statute of limitations. Failure to file results in the IRS’s formal tax assessment after the 90-day period.
The IRS must make a formal tax “assessment” under § 6203 within the statute of limitations, typically three years from the return’s filing date or due date, barring extensions. If no return is filed, the statute of limitations does not apply, remaining open indefinitely. There are no limitations for fraud, and certain items have unique statutes of limitations apart from the general three-year rule. Formal assessment precedes any collection action, including property liens.