Answered

Discover the answers you need at Westonci.ca, where experts provide clear and concise information on various topics. Explore a wealth of knowledge from professionals across various disciplines on our comprehensive Q&A platform. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.

a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount (more than 25%) of gross income. a. Respond to Andy as he is seeking your advice as to whether the IRS is barred from assessing additional income tax in the event he is audited. Because a six-year statute of limitations applies to a substantial omission of gross income, the IRS can assess additional income tax in the event Andy is audited. b. Assume you were the person who prepared the return. Should you make a disclosure to the IRS regarding the omission on Andy's prior tax return

Sagot :

anthougo

My advice to Andy is that the IRS is not barred from the assessment of additional income tax because the amount is substantial and the six-year limitation period has not been exceeded.

a) Andy should report the omission in his next tax returns and clearly explain how the inadvertent omission happened.  The IRS normally expects Andy to keep records for 6 years for unreported taxable income, especially since the income is more than 25% of his prior gross income.

b) As the professional who prepared the tax returns for Andy, once the omission is discovered, I should advice Andy to report to the IRS.  It is better to persuade him to self-report to lessen the penalty, instead of reporting directly to the IRS about the omission on Andy's prior tax return.

Thus, the three-year limitation period does not apply to substantial (25% and above) unreported income.  The income must be reported to the IRS.  Otherwise, the IRS will still find out during its matching process and impose substantial penalties.

Read more about omission of substantial gross income by a taxpayer at https://brainly.com/question/14895842

Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.