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FAQ

Why should a law or the constitution be open to interpretations? Shouldn't it be unequivocal? Doesn't it make the idea of justice very subjective?
No, it does not make justice subjective. The challenge of legal interpretation is to find intent. Once intent is known, courts apply the law to the facts in the controversies that come up. To dispel the notion that justice is subjective, spend some time in a courtroom to see how the laws are administered. More generally, the challenge of interpretation arises not only with statutes and constitutions but also regulations, ordinances, wills, deeds to property, leases, mortgages, wills, trusts, contracts, and any other legal document.Look at the question presented here: Why should a law or the constitution be open to interpretations? Shouldn't it be unequivocal? Doesn't it make the idea of justice very subjective? (Enumeration and emphasis added).The OP knows what he meant when s/he posted it. Nevertheless, I italicized the two uses of the word "it." What is the meaning of the use of "it" in question 2? The antecedent in question 1 is probably "a law or the constitution." Or maybe the antecedent is "interpretations." If referring to "interpretations," wouldn't the proper form of the question use "they?" Likewise, if referring to "a law or the constitution," wouldn't it be more proper to use "they?" Therefore, does "it" refer to "a law" or does it refer to "the constitution?" The intent of question 2 is unclear.What does "it" refer to in question 3? "Doesn't [what] make the idea of justice very subjective?" Does it refer to "interpretations," "a law," "the constitution," or something else?This is a challenge in any written language. To discern intent, one must interpret.
What are the limitations on tax audits? Is it true that the IRS can’t audit you 3 yrs in a row?
IRS can audit any entity without limitation - as many years in a row as it deems warranted.What is limited is the period in which an assessment of tax can be made under section 6501 of the Internal Revenue Code - normally three years from the later of the due date of the return or the date it was filed.The refund statute of limitations is generally covered by section 6511 of the Internal Revenue Code - normally three years from the later of the return due date or the date the return was filed OR within two years of the tax having been paid (an additional special rule).But, there are many exceptions to the refund statute expiration date (RSED) and the assessment statute expiration date (ASED) - too many to discuss in this forum.With regard to my first paragraph, there are information returns that have no ASED and can be analyzed, where deemed necessary, without regard to any statute limitation issues. These would include partnership returns and non-taxable S-corporation returns. Again, these flow through entities are information returns - entities where there can be no tax assessment or refund of taxes simply because no tax is required to be paid. The tax would be paid by the investors in the flow through entity - a concept too vast to explain in this forum.Just for an example of an exception to the 3-year ASED, a taxpayer may have had a net operating loss in 2021 and carried back that loss to 2021 under section 172(b)(1) of the Internal Revenue Code. The statute of limitation for assessment on any tax owing for 2021 is covered by section 6501(h) of the Internal Revenue Code and is directly tied to the statute of limitation for the 2021 tax return (assuming the 2021 regular statute of limitation had expired). Without getting into specifics (since this isn’t a tax class), assuming the regular statute of limitation had expired for 2021. the assessment for any tax in that year could be assessed by the later of (a) three years after the due date of the 2021 tax return or (b) three years after the actual filing date of the 2021 return.I hope this satisfactorily answered the questions posed. You can Google any of the above technical citations and see the law for yourself.
Is there a statute of limitations for a IRS Tax Lien?
The IRS has ten (10) years from the date of a tax assessment to collect a debt from the taxpayer. The date the collection statute expires is called the Collection Statute Expiration Date or CSED.When this date passes, the IRS is barred from attempting to collect your tax debt unless you waive the enforcement of the statute.When Does the Collection Statute Start to Run?The statute starts on the day an IRS assessment is made.Generally, the dates of assessment are as follows:Filed tax returns ‡ The date you mailed the tax return plus six weeks.Audit Adjustments (agreed) ‡ The date you signed the auditor’s report plus three weeks.Audit Adjustments (unagreed) ‡ The date the appeals process and the tax court process (if any) is completed and the tax court judge has issued his or her ruling.What Will Cause the Collection Statute to be Extended?The Collection Statute can be extended (tolled) by one or more of the following acts or situations:The filing of a bankruptcy petition ‡ The statute is extended for duration of the bankruptcy proceedings.The filing of an Offer in Compromise ‡ The statute is extended for duration of the Offer or one year, whichever is greater.The filing of requests for relief ‡ The statute is extended when a taxpayer files for a Collection Due Process hearing, Innocent Spouse Relief and any other form of relief that requires the IRS to suspend collection enforcement while it reviews the validity of the underlying assessment.The signing of a waiver extending the statute ‡ The statute is extended to date indicated in signed waiver. Never sign a statute extension without first consulting your tax advisor.The taxpayer is out of IRS jurisdiction ‡ The statute is extended for duration taxpayer was out of IRS jurisdiction.He's The Tax Man is a tax attorney and certified public accountant helping taxpayers resolve their IRS and state tax problems.
The IRS states they keep tax returns for 10 years, but a former IRS agent told me they really keep tax returns for 40 years or more. Which is true?
As a prior employee of the IRS, I know the IRS maintains files of Individual returns for 3 years, however in the event of an audit it can be longer. We also had files on certain returns maintained for several years . Appellate cases were kept for several years. So the former IRS agent is correct.If you are wondering how long you should keep your own tax filings, IRS gives you an idea of how long you should maintain your records at this website: RecordkeepingThe normal Statute of Limitations is 3 years on Forms 1040. However, IF you claim certain losses, have unreported income, etc, the statute of limitations can be extended to .https://www.irs.gov/pub/irs-pdf/...How Long to Keep Records. You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support items shown on your return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your return to claim a credit or refund or the IRS can assess additional tax. Table 1-7 contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period beginning after the return was filed. Returns filed before the due date are treated as being filed on the due date.Table 1-7.Period of LimitationsIF you... THEN the period is...1 File a return and (2), (3), and (4) don't apply to you THEN the period is...3 years2 Don't report income that you should and it is more than 25% of the gross income shown on your return THEN the period is...6 years3 File a fraudulent return THEN the period is...No limit4 Don't file a return THEN the period is...No limit5 File a claim for credit or refund after you filed your return THEN the period is...The later of 3 years or 2 years after tax was paid6 File a claim for a loss from worthless securities or bad debt deduction THEN the period is...7 years Property.Hope this is helpful.
Is it true that if the IRS don't collect a debt that I owe within 10 years I'm relieved of the debt?
In general, this is true. However, the IRS rarely sits by passively while the 10-year collections statute expires. If you owe money, the IRS will make serious efforts to collect the debt. The IRS can stop you from receiving any current and future refunds until the debt is satisfied. The IRS can quickly and easily place a levy on your Social Security payments and on any bank accounts you might have, freezing the account so that you have no access to the funds. It's also fairly easy for the IRS to levy your salary. If you own property and owe a large enough sum, the IRS will place a lien on your property. If a lien is placed on your house, the IRS won't take the house you live in. However, if you attempt to sell the house, the lien will assure that proceeds from the sale go to the IRS debt.The best suggestion I can give you is not to ignore IRS collection notices. Not only can ignoring the IRS result in liens and levies, but penalties could start accruing at higher rates. If you call and set up a payment plan, aggressive collection efforts will be halted as long as you keep making timely installment payments. If you're unable to pay, don't count on the IRS to figure this out on their own. Call and explain your situation. You'll be required to provide proof. Further collections efforts can be frozen indefinitely if your account is placed in currently non collectible status. It's true that if this continues for 10 years and the IRS hasn't collected the debt, the statute will have expired. However, if your account is in currently non collectible status, the IRS will keep checking to make sure your status hasn't changed. If the IRS determines that you're now able to pay, collections actions will resume.
If you haven't filed your taxes in years, but if you had, you would have gotten a refund, how can you get back on track?
The answer to this question is that you are obligated to file all of your tax returns. The statute of limitations doesn't begin to run until a tax return is filed. So, IRS can ask for the related tax many years after it would normally be due simply because the statute of limitations hasn't run out.In regard to your alleged refunds, you only get three years to request your refund under Internal Revenue Code section 6511 - and you have to file a tax return to request this refund. Once the 3-year statute has expired, regardless of whether you've timely filed, any refunds that would be due will not be paid. The lesson here is for folks to just file their tax returns when they are due.
What is the time limit to refund an excess tax remitted?
“A claim for refund must be filed within 3 years from the time the return was filed or 2 years from the date tax was paid, whichever is later. And if no return is filed, then 2 years from the date payment was made. Secondly, the IRS may refund only the amount of tax paid within three years plus the period of any extensions, or two years from the date of payment.”More information about IRS statute of limitations:IRS Statute of LimitationsWhat is an IRS Statute of Limitations?IRS statute of limitations are time periods established by law to review, analyze, and resolve taxpayer and/or IRS tax related issues.The Internal Revenue Code requires the IRS to assess, refund, credit, and collect taxes within specified limits.Once the statute of limitations has expired, the IRS cannot assess additional tax, allow a claim for refund, or take collections action.When does the Statute of Limitations expire?General rule for tax assessment ‡ 3 yearsOn an individual tax return, the statute of limitations for the IRS to assess additional tax or initiate collections action is 3 years after the original due date of the return, or 3 years after the date the return was actually filed, whichever is later. IRC 6501For a return filed before the statutory due date (usually April 15 unless it falls on a weekend or holiday), the statute begins on the statutory due date. If a return is filed within a period of extension or after, the IRS statute of limitations begins on the actual filing date.For example, you filed an extension for your 2021 taxes to October 15, 2021. You file your tax return on July 1, 2021. Since the return statutory due date was due April 15, 2021 and July 1, 2021 is later than the statutory due date, the statute of limitations expiration date is July 1, 2018.Let’s say you file your 2021 taxes on March 15, 2021. The statute of limitations expiration date would then be April 15, 2021. since this is the later of the return filing date and statutory due date.There are three exceptions to this rule:If you understate your income by more than 25% the statute of limitations increases to 6 years.There is no IRS statute of limitations on delinquent non-filed returns.You sign a consent to extend the statute by signing Form 872Refund statute of limitations established by IRC 6511.A claim for refund must be filed within 3 years from the time the return was filed or 2 years from the date tax was paid, whichever is later. And if no return is filed, then 2 years from the date payment was made. Secondly, the IRS may refund only the amount of tax paid within three years plus the period of any extensions, or two years from the date of payment.Let’s take a look at some examples. Bob files his 2021 tax return on March 15, 2021 and pays his tax balance on the same date. Subsequently, Bob realizes that he forgot to include some expenses for his home business. His 3 years begins to run from the statutory due date of April 15, 2021. Therefore, he has until April 15, 2021 to file an amended return to claim a refund.Bob files an extension to October 15, 2021. He files and pays his taxes on September 15, 2021. He has until September 15, 2021 to file an amended return. When the tax return is filed within the extension period, the refund statute of limitations begins on the actual filing date.What if you have not filed but are owed a refund due to excess federal withholdings or estimated tax payments? For example, Bob makes a “safe harbor” estimated tax payment on December 31, 2021 and has not yet filed his 2021 tax return. On an unfiled tax return, the IRS has established a 2 year rule for filing a return in order to claim a refund. So in this case, Bob has until December 31, 2021 to file his tax return to get his refund.10-year statute of limitations on collections.Generally, the IRS may only attempt to collect unpaid taxes for up to 10 years from the date they were assessed. After this period, the IRS must cease any collections activity.Here’s an example to show how the assessment statute and collections statute work together. Bob files his 2021 return on April 15, 2021 but forgets to include stock sales on his return. The IRS has until April 15, 2021 to assess tax on the unreported income and file a lien or levy. And the IRS assesses taxes and starts wage garnishment on April 15, 2021 after sending Bob numerous tax notices which he ignores. The IRS can continue wage garnishment until April 15, 2021. or until the balance has been paid off.Note that the above rules are just general applications of the statute of limitations. There are numerous exceptions to these rules. If you are under audit, it is important to find a qualified attorney to prevent the IRS from going beyond the statute of limitations, or even to minimize how far back the IRS will audit within the statute.
How can one get money back from the IRS that wasn't owed in the first place?
If the tax was overpaid, you maybe due a refund. There is no indication of the tax years involved and whether they were timely filed (or not). However, Internal Revenue Code section 6511 covers "limitations on credits or refunds" and you may be able to rely on this section to file a claim for refund. The rule under section 6511(a) states that the amended return must be filed by a taxpayer within 3 years from the time the tax return was filed or 2 years from the time the tax was paid - whichever of such periods expires later.Under IRC section 6511(b)(2)(B), the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim (Form 1040X) if the claim was not filed within the aforementioned 3-year period (normal statute of limitations.You need to check to see how much tax was paid and collect your proof before contacting a tax pro who will prepare and file your claim for refund.Without more information, this is the best answer I can provide for you.
Why are there so many legal loopholes for the rich to avoid taxes?
It depends on what you call “loopholes”.There are many tax exemptions, deductions and credits that are placed into the law specifically to allow taxpayers to defer, reduce or avoid tax. The important thing to understand is that very few are accidents. They are placed there for political reasons - remember, the tax code (of every country) is written by politicians.Yes, it’s all (okay, mostly) about politicsIn Canada, we have a special credit for volunteer firefighters. Why? Are firefighters in special need? No. They make considerably better incomes than most of us. Volunteers tend to be on the slightly wealthier side as well.It doesn’t make the tax system more effective or efficient. It just clogs up the works. The answer is that this group of people, their families and their friends, are politically powerful. They tend to be well-connected in their communities. They are regarded by people in general as “good”. Creating a credit for them is a way of the government of the day Virtue signalling. It generates votes.In Canada, as in many countries, the Goods and services tax (which is a Value-added tax) exempts most food and medical items (I’m not getting into the picayune difference between exemption and zero-rating). That is actually a boon to the rich, although it’s not portrayed that way. Why? Because many people think that as a necessity, food should not be taxed. It’s an emotional item, not an intellectual one. Lots of people buy food. Exempting food is thus good politics.A better system would tax everything, and have a lower rate.Canada exempts capital gains on principal residences. Why? Because there would be an uproar if we changed. No serious tax academic thinks this is good policy.Functional loopholesThere are some tax concessions that actually make sense. Having a lower tax rate for corporations is important, because corporations have a great deal of flexibility in where they operate. Jurisdictions compete. Choosing to have a high corporate tax rate makes your location uncompetitive. This is why Canada has reduced its corporate tax rate by 10 percentage points over the past decade, and why the United States will reduce its corporate tax rate this year.Taxing income earned offshore is even more challenging. Most countries, including Canada, don’t even try.Don’t like tax competition? Think we should have one world government? That’s a whole ‘nuther ball o‡ wax.In many countries, retirement savings are tax-deferred. You contribute money to a pension plan, Registered Retirement Savings Plan, or Individual retirement account? You’re using a loophole. And the higher the contribution limits, the more they benefit “the rich”. But there are good arguments against taxing savingsMany countries tax capital gains more lightly than other income. One argument is this approach is required since the tax system doesn’t take into account inflation. I liked Australia’s old indexing approach, but they abandoned it as too complex. The other argument is that it incentivizes risk taking. Personally, I don’t think the tax system should be incentivizing any particular activity. It’s bad economics. But it’s a legitimate argument.And then there are the write-offs that are specific to certain industries. They get them by lobbying. Politicians listen.PervasivenessEvery country has tax expenditures. Canada actually categorizes and measures them.Of course, defining what is a tax expenditure is sometimes hard. The caregiver credit may be easy to call out, but retirement savings incentives are not so clear. Subjecting investment income to tax is economically double-taxation.Want a pure tax system? You’ll have to move to a country with no politics.Exactly.
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