In March 2015, Jim asks you to prepare his Federal income tax returns for tax ye

Question

In March 2015, Jim asks you to prepare his Federal income tax returns for tax years 2012, 2013, and 2014. In discussing this matter with him, you discover that he also has not filed for tax year 2011. When you mention this fact, Jim tells you that the statute of limitations precludes the IRS from taking any action as to this year.

a. Is Jim correct about the application of the statute of limitations? Why or why not?

b. If Jim refuses to file for 2011, should you prepare returns for 2012 through 2014? Explain.

Explanation / Answer

a. IRS can generally assess for a particular year within three years from the due date of filing the return hence JIM is incorrect as action can be taken for 2011.

b.Return should be filed for JIM for the years 2012 to 2014 as this would enable him better compliance. Also filing of retunr would be in the interest of the nation as it would allow IRS to trace JIMs previous untaxed income.

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