Understanding the Statute of Limitations for Gift Tax Audits
The Internal Revenue Service (IRS) has a limited amount of time to audit your gift tax returns and assess any additional taxes owed. This time period is known as the statute of limitations.
General Rule: Three-Year Limit
In general, the IRS has three years from the date you filed your gift tax return (or the due date of the return, whichever is later) to assess any additional gift tax. This means that the IRS can only audit your gift tax returns for the past three years.
Exceptions to the Three-Year Rule
There are a few exceptions to the three-year statute of limitations:
- Fraud: If the IRS determines that you fraudulently understated your gift tax liability, there is no statute of limitations. The IRS can audit your gift tax returns for any year in which you fraudulently understated your liability.
- Failure to File: If you fail to file a gift tax return, the IRS has an unlimited amount of time to assess additional gift tax.
- Gross Valuation Misstatement: If you significantly undervalue a gift on your tax return, the IRS has six years to assess additional gift tax.
Protecting Yourself from Audits
To protect yourself from gift tax audits, it is important to:
- File your gift tax returns on time and accurately report all gifts.
- Keep records of all gifts you make, including the date, amount, and recipient of the gift.
- If you are audited, cooperate with the IRS and provide all requested documentation.
Recent Developments
In a recent case, the IRS attempted to assess gift tax on a taxpayer’s gifts made more than three years prior to the audit. The taxpayer argued that the IRS was time-barred from assessing the tax because the statute of limitations had expired. The court agreed with the taxpayer and ruled that the IRS could not assess the gift tax.
This case highlights the importance of the statute of limitations for gift tax audits. If you have not been audited within three years of filing your gift tax return, the IRS is generally prohibited from assessing additional gift tax.
The IRS has a limited amount of time to audit your gift tax returns and assess any additional taxes owed. In general, the IRS has three years from the date you filed your gift tax return to assess any additional gift tax. However, there are a few exceptions to this rule. To protect yourself from audits, it is important to file your gift tax returns on time and accurately report all gifts.
Additional Resources:
How far back can IRS audit?
FAQ
How long does IRS have to audit gift tax returns?
How does the IRS know if I give a gift?
Can the IRS go back more than 10 years?
How does the IRS find unreported gifts?
How far back can an IRS audit go?
In most cases, Internal Revenue Service audits reach back a maximum of three years –but exceptions to the audit period apply. How far back can the IRS audit? The IRS generally includes tax returns filed within the past three years in an audit.
How many years can a tax return be audited?
Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don’t go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.
How long do you go back on tax returns?
We usually don’t go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly, most audits will be of returns filed within the last two years. If an audit is not resolved, we may request extending the statute of limitations for assessment tax.
How does a gift tax return come under audit?
Cohen then discussed how a gift tax return comes under audit; the process is similar to that of an ordinary income tax return. Notice is then sent to the taxpayer and, possibly, the representative; Cohen noted that filing a power of attorney (Form 2848) can help ensure that the taxpayer’s representative is included on the notice.