What can taxpayers learn from the Trump family?

A recent publication in the New York Times has led to some questions about alleged wrongdoing by the Trump family. The wrongdoings center on allegations of tax fraud and have raised a number of questions throughout the country.

For example, how does the IRS choose to review a taxpayer’s filings? Often, these reviews are the result of a whistle blower action. A recent report by Forbes notes the IRS collected more than $3.6 billion from whistle blower actions that involved ex-spouses or employees turning earn their former partners or employers.

Another question, how long does the IRS have to pursue these charges? The answer is not a simple one. Like many areas in the legal world, the answer depends on the details of the allegations. The Internal Revenue Service (IRS) generally has three years to review filings — but there are exceptions.

Exception #1: Substantial understatement of income. What does this mean? Basically, the IRS can look back beyond the three-year mark if it determines the tax filing understates income by 25 percent or more. In these cases, the IRS has a six-year look back period.

Exception #2: Fraud. When it comes to civil penalties, the agency can receive an indefinite extension if, when reviewing the tax filings due to substantial understatements of income, the IRS finds the tax payer committed fraud.

Exception #3: Willful evasion of taxes. The IRS also has an indefinite extension for those who willfully attempt to evade their tax obligations.

Exception #4: Failure to file. Forgot to file the taxes? This misstep also allows the IRS the ability to look back indefinitely.

And finally, how will this report impact the Trump family? The true impact is not known. However, if the allegations are supported the family could face penalties from both the IRS and State of New York.

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