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Time can be a fickle factor when tax evasion is alleged

A common question asked related to federal income tax filing is: How long should I hold on to receipts? It's a fair question, considering that if the Internal Revenue Service decides to investigate and order an audit, they likely will want to go back a ways. Receipts will help confirm that claims made in filed returns are legitimate and mitigate exposure to possible charges of tax evasion.

Unfortunately, there's not a really simple answer. As a general rule, the IRS has three years from the date a return is filed to perform an audit. But that window could end up being longer depending on the circumstances of a given case.

By way of example, consider this. If a filer fails to report more than 25 percent of income on a return, the three-year limit becomes six. That trigger can be pulled even if the oversight by the filer wasn't intentional. Considering how confusing taxes can be, it's feasible to think that a person might act in all good faith to meet their tax obligations, and still be scrutinized by the IRS. It can come down to questions of interpretation.

Another factor that can make gauging the statute of limitations tricky is that the clock can start and stop. The return filing date is the key benchmark for starting, but in cases of alleged tax evasion, the clock may be paused if a person being examined leaves the country or opts to go on the lam.

The courts have also found that the clock doesn't begin to run until the last action of alleged evasion has occurred. That could leave a case open almost indefinitely.

Ultimately, anyone with concerns, for whatever reason, would be wise to consult first with an experienced tax attorney.

Source: Forbes.com, "How Far Back Can IRS Claim Tax Evasion Or Fraud? Timing Is Everything," Robert. W. Wood, Oct. 13, 2013

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