Posts by Christopher Axene, CPA:
- April 15, 2015 – you filed your 2014 tax return with the IRS
- March 31, 2018 – the IRS assesses additional taxes on your 2014 tax return
- The IRS has until March 31, 2028, to collect the additional tax or file suit against you.
- New product development marketing
- Lean manufacturing implementations
- Quality certifications (ISO, TS)
- Enterprise resource planning (system selection, training)
- Capital expenditures (e.g. equipment or software)
- On-going business expenses (e.g. FTE salaries)
- On-going business processes
Bob recently received a copy of his account transcripts from the IRS. Upon reviewing the paperwork, he noticed that the government agency made note of a “date of assessment,” which prompted him to wonder how the date of assessment was determined? Moreover, he wanted to know what role one’s date of assessment plays with regard to the time frame the government has to collect back taxes.
If you ever find yourself in a situation similar to Bob’s, with questions about your tax history, in addition to speaking with your tax advisor, you can request that a copy of your tax return transcript and tax account transcript be mailed to you. Fill out the online form here, but make sure you are making the request for the current tax year’s transcript or transcripts for three years prior.
If you are requesting transcripts for older tax years or you need a wage and income transcript or verification of non-filing letter, you’ll need to complete Form 4506-T and send it to the address listed on the form’s instructions. Due to a recent security breach, your transcripts will not be sent electronically.
How Far Back Can The IRS Go To Collect Back Taxes?
If the IRS is attempting to collect past due taxes, the agency will assign a date of assessment to your IRS account transcript.
Like many of the invoices you see every day, every item on your transcript will be assigned a code. Your date of assessment is no different. To identify the date of assessment on your account transcript for the tax year in question, look for Transaction Code “150.” Tip: If you are wondering what the other codes on your transcript mean, you can find a comprehensive list here.
As a general rule, the IRS must assess tax, or file suit against the taxpayer to collect the back taxes, within three years after the original tax return was filed. This three-year period of limitation on assessments also applies to penalties. In fact, this rule continues to apply regardless of whether the return was filed on time or not. In general, the statute of limitations will almost always begin the day after the taxpayer files their income tax return.
The Rules May Not Apply
It seems as though there are always exceptions to the rules we work so hard to uphold – taxes are not excluded from this trend. For instance, when a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.
While the statute of limitations for assessment is three years after your return has been filed, the IRS still has 10 years to actually collect the assessed tax. Below is an example of the assessment process in action:
While this information may help to shine some light on IRS assessments and statute of limitations rules, every situation is unique and hinges on several specific variables. Your tax advisor can help you sort through codes and details to get you back on the right track. Email Rea & Associates to learn more.
By Christopher Axene, CPA (Dublin office)
Check out these articles to learn more about your responsibilities as a taxpayer:
The IRS recently issued taxpayer-friendly guidance regarding the disposition of a component of real or personal property.
Under the Internal Revenue Code, taxpayers are required to capitalize certain amounts paid to acquire, produce or improve real or tangible personal property during the year and that is used for a trade, business or for the production of income. However, prior to the issuance of new regulations in 2013 taxpayers were unable to write-off the remaining cost of a component of a larger asset or building that was repaired or replaced (e.g. a roof). In fact, under the old rules, it was not uncommon for business owners to be required to depreciate “ghost assets” – assets that were removed or replaced by the taxpayer and are no longer in service.
The good news is that the IRS has changed its mind on these, so-called, “partial dispositions.”
So, What’s Changing?
Beginning Jan. 1, 2014, taxpayers were able to deduct the remaining cost of such components in the year they were replaced/repaired by making an election on their tax return.
Additionally, the IRS allowed taxpayers to apply the regulations to dispositions that had already happened in prior years as long as the ghost assets were still being depreciated.
What was unclear until recently was how a taxpayer could effectively make the election on a retroactive basis given that businesses were required to file their 2013 year tax returns before the IRS had issued definitive guidance.
The IRS’ Response
The IRS officially announced a specific revenue procedure that provides a limited opportunity for taxpayers to write-off assets that were disposed of during a prior year. The guidance outlines the procedures necessary for taxpayers to secure the write-off, as well as what documents they should include when filing their request. If you do plan to write off a ghost asset from a previous year, you must make plans do so now as this retroactive election opportunity is time sensitive. Taxpayers who miss this opportunity will be required to continue depreciating these ghost assets. For some, this means that you could be depreciating ghost assets for another 15-20 years.
Are you a business owner who is still paying the IRS for assets that you no longer have or that have been replaced? Do you want to learn more about the IRS’s new rules on ghost assets and how they can impact your business? Email Rea & Associates to find out if you can write off ghost assets that continue to haunt your business.
Author: Chris Axene, CPA (Dublin office)
America is the land of the free, and a place where we’re all supposed to have boundless opportunities. So if you’re the business owner of a small manufacturer, and you’re feeling financially and competitively pinched because of foreign imports, know that there is relief.
Trade Adjustment Assistance
The U.S. Department of Commerce’s Economic Development Administration developed and funds a program to help manufacturing companies become more competitive against foreign imports. The program, “Trade Adjustment Assistance for Firms,” provides up to $75,000 in matching funds to qualifying manufacturers to invest in projects identified during the plan development phase. Qualifying projects must be time-limited and performed by third parties who provide knowledge-based help covering the areas of marketing, industrial and systems engineering or financial and general management consulting.
Examples of “qualifying projects” include:
“Non-qualifying” projects include:
Big Benefit Of Trade Adjustment Assistance for Firms Program
An added benefit of the program is a customized diagnostic survey and comprehensive action plan created for the business by the program’s personnel. There is no fee to apply to the program. Once eligibility for the program is confirmed, the plan development phase typically takes one to three months with the implementation phase able to run for up to five years. Any funds not expended after five years are lost.
Funding for this program was recently renewed so now is the time to invest 30 minutes of your time to speak with a program representative to see if you qualify.
Ohio Small Manufacturer Help
If you’re an Ohio Small Manufacturer that’s having trouble keeping up with foreign imports and competition, and needs assistance with strengthening your business’s bottom line, contact Rea & Associates. Our Ohio manufacturing service team can help you evaluate your business’s current financial state and determine what steps you need to take to get back in the game.
Author: Christopher E. Axene, CPA (Dublin office)
Looking for more Ohio manufacturing-related articles? Check these blog posts out:
If you’re about to acquire, produce or improve real or tangible personal property, and then turn around and use the property in a trade of business for income, stop right there. Under the Internal Revenue Code, you’re required to capitalize certain amounts of money you invested into the property. Read the rest of this entry “
We’ve read for weeks that a government shutdown was possible, but at 12 a.m. this morning, it happened. It has been 17 years since the last government shutdown, and you, along with the rest of the American people, are probably wondering how the shutdown will impact their lives. Fortunately, last week the Internal Revenue Service published “FY 2014 Shutdown Contingency Plan (During Lapsed Appropriations) Non-Filing Season,” a set of guidelines that explains what will go on at the IRS during a shutdown. Read the rest of this entry “
This article discusses the changes to individual tax payers that are in a legal same-sex marriage.
Earlier this year the Supreme Court declared that section 3 of the Defense of Marriage Act (DOMA) was unconstitutional. Section 3 of DOMA required that same-sex spouses are to be treated as unmarried for purpose of federal law. It is now recognized that same-sex couples that were legally married in states that recognize same-sex marriages, will be treated as married for federal tax purposes, even if the state they are currently residing in does not allow same-sex marriages. The same is true for couples married legally in a foreign jurisdiction. This now allows for same-sex married couples to file with the status of “married filing jointly” (MFJ) or “married filing separately” (MFS). Read the rest of this entry “
ACT FAST: Limited Time Offer for RMDs
Thanks to a hot-off-the-presses provision in the new tax law, taxpayers over 70 ½ have a very limited window to address 2012 required minimum distributions (RMDs) from their retirement accounts.
Here’s what happened: an incentive for donating your RMDs directly to charity tax-free expired in 2011, so at the end of 2012 many of you weren’t sure what to do. Some of you may have taken your RMD as usual and used that money toward regular living expenses, but other retirees who typically donate their RMD to charity may have taken a different approach. Read the rest of this entry “
By now you’ve heard that last minute actions by Congress and the President pulled us off the brink of the fiscal cliff. But, do you know what the American Taxpayer Relief Act means for you and your business?
Overall, the deal is good news for most Americans. While it’s true that the tax rates for 99 percent of taxpayers will not change, everyone who pays payroll taxes will see a slight increase. Here’s what you, as an individual taxpayer, should expect in the year to come: Read the rest of this entry “
Tax treatment of property repairs has long frustrated business owners and accountants alike. The system has been confusing, hard to follow and seemingly eternally inconsistent. Recent changes to the Internal Revenue Code have streamlined the treatments of property repairs, but not all the changes are as taxpayer-friendly as you may have hoped. Read the rest of this entry “
Downsizing by companies has been a fact of life over the past several years. As a part of this process companies may have paid severance payments to employees who were involuntarily terminated due to either: (1) reduction in force (“RIF”) initiatives or (2) plant closings or other similar conditions.
Historically the IRS has argued that such payments are subject to FICA tax withholding in addition to income tax withholding at the time of payment. In 2002, the Court of Federal Claims in CSX Corp v. U.S. held that severance payments made by CSX were not subject to FICA tax and thus CSX was entitled to refunds of amounts previously withheld. The IRS appealed and in 2008 the Court of Appeals for the Federal Circuit reversed the Court of Claims holding that such payments were subject to FICA tax. Read the rest of this entry “