While many people are focusing on preparing for the holiday season, it is worth noting that tax season is just around the corner. It is fairly common for employers to begin sending w-2 notices so that taxpayers can begin filing their income taxes.
Indeed, employers are required to send these notices, but what is a taxpayer’s responsibility going forward? This post will explain.
The U.S. Tax Code calls for taxpayers to follow the “voluntary tax compliance” system. This means that taxpayers bear the following burdens each year before April 15: accurately reporting income, calculating the proper tax due, and filing a tax return. Implicit in this notion is the right of the IRS to audit tax returns to ensure that everyone is following the rules.
This means that the IRS will review a return and analyze it to discover inconsistencies suggesting that a taxpayer is using improper deductions, not accurately reporting income, or making other errors that affect the tax due.
Should the IRS determine that taxes must be paid, there is generally a three-year statute of limitations that the IRS must follow. This means that the federal government has a three-year window in order to bring an action to collect on past due taxes. Once the window closes, the IRS essentially forfeits its right to collect.
At the same time, a taxpayer may not collect a refund on a tax return that is more than three years old. If you have questions about preparing a return or how to handle past taxes that have come due, an experienced attorney can help.