When it comes tax time, filing a return can be a dreaded task for many business owners.
Although they can be a headache, filing your taxes is an important part of your business. Once you file, it is essential that you remember the date you submit them and that you understand the statute of limitations.
What is the statute of limitations? This is a time period that is established by law that the IRS has to audit a taxpayer’s return and to collect back taxes. During this period the IRS will review your taxes and resolve any tax issues that are caused either by yourself or the IRS. The federal tax statute of limitations is usually three years after you have filed your taxes, however, there are exceptions to this.
For example, if you happen to file your taxes late then the statute of limitations will run from the date you submitted them. If you filed your return earlier than the due date of April 15th, on the other hand, the three years do not also begin early. The three year assessment period will begin on April 15th in this case.
If you have an approved extension to October 15th and file then, your three years will run from this date. However, if you live in California, it is important to note that the state gets an additional year so the statute of limitations is actually four years from filing instead of three.
Why is this information important? It is critical that you remember the date you filed your taxes so that you know from what start date to base the three years from and how to calculate the date. This is important because the taxpayer’s ability to file a timely refund claim for paid tax as well as the IRS’ authority to assess tax is calculated based upon these dates.
When it comes to disputes and tax audits, the actual filing date is pivotal. Overall, it is best practice for you to submit your taxes on time and not pass the due date. Also, it is important that you file your taxes the correct way to avoid any issues with the IRS.
Follow directions provided by the IRS exactly so that they successfully receive your return. When you do file your return, be sure to keep a good record of exactly what you sent in. Good record keeping includes electronic confirmations, proof of mailing and a certified receipt. By having proof that you actually filed, record of your filing date, and the date that the IRS received your information, you will be able to resolve issues quickly if it is stated that you did not file your taxes.
In conclusion, it is essential that you remain organized and that you keep copies of your returns as well as correspondence with the IRS. This way you can always refer back to information if anything is ever being questioned. Although storing this information may seem like a hassle, tax disputes can be expensive and time consuming. If you would like to avoid them, always be mindful of important filing dates and keep your documents organized so that you are prepared.