Tax Law

The Scariest Tax Form? Scary Is in the Eye of the Beholder

Robert Wood has a timely reminder that certain forms, if not filed or filed properly, can create major statute of limitations problems for U.S. taxpayers. Robert W. Wood, Scariest Tax Form? Skip It, And IRS Can Audit Forever (Forbes 3/l3/14), here. The particular form he focuses on is the Form 5471. The Form 5471 is here. The instructions for the form are here (in pdf format) and here (in html format). Here is the key excerpt:

The IRS normally gets three years to audit. Sometimes, say if you mess up with offshore account reporting, the IRS gets six. Having a foreign bank account and unreported income is tough to resolve. The safest approach is going into the IRS Offshore Voluntary Disclosure Program, although some clients opt for more aggressive approaches....


This statutory override of the normal statute of limitations is sweeping. The IRS not only has an indefinite period to examine and assess taxes on items relating to the missing Form 5471. In fact, the IRS can make any adjustments to the entire tax return with no expiration until the required Form 5471 is filed. You might think of a Form 5471 like the signature on your return. Without it, it really isn’t a return.

This is scary. But there are many returns and return filing obligations that are scary. Picky and choosing is a matter of personal preference. Mr. Woods is concerned about an unlimited civil statute of limitations -- or at least a civil statute suspension until the information is provided. The criminal statute of limitations is not suspended.

View Jack Townsend's opinion in its entirety on the Federal Tax Crimes blog site.

For additional insight, explore Tax Crimes, authored by Jack Townsend and available at the LexisNexis® Store


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