Limits of retroactivity of tax assessments in the United States
There are time limits within which the IRS (Internal Revenue Servicesimilar to the Italian Agenzia delle Entrate) it may request tax assessments, which means that the IRS will not be able to carry out tax assessments beyond the terms established by law. This prescription period usually starts at a certain date and can only be extended, in particular circumstances. According to the wording of Article 6501 of the Tax Code, the limitation period is three years. It is important to underline that requesting an extension for the filing of taxes involves the corresponding extension of the limitation period. For example, if taxes are deposited on April 15th 2018 (date usually indicated for the filing and payment of taxes), the IRS will have until April 15th 2021 to start the assessment; however, if the extension has been requested until October 15, 2018, the IRS may begin the assessment by October 15, 2021. Article 6501 indicates another case that lengthens the statute of limitations. The three-year limit is in fact doubled if the IRS finds that the taxpayer has failed to declare revenue exceeding the data indicated in the tax return by 25%. In this specific case, the IRS will be able to start the assessment in the year 2025, observing the same dates indicated above. The discrepancy in the declared values can also occur for unintentional reasons. For example, the tax payer exceeds in estimating the value of an asset sold and that he held as in the case of real estate or shares for a long time. In these cases the IRS does not consider the discrepancy as intentional if, within the declaration, the tax payer indicates the methods with which he calculated the taxable amount so that the IRS itself can itself estimate the asset. If this declaration method is respected, the limitation period remains fixed at three years Finally, please note that in cases of false and fraudulent declarations, the Tax Code does not impose any limitation period if it detects the will to escape with false statements or in cases of total lack of due declarations.
Finally, please note that in cases of false and fraudulent declarations, the Tax Code does not impose any limitation period if it detects the will to escape with false statements or in cases of total lack of due declarations.
The assessment procedure
The assessment usually begins with a written communication sent by ordinary mail. The IRS does not send e-mail communications under any circumstances, if you receive an email from the US Tax Office, it is a fraud or an attempt to "scare" the tax payer into selling tax assistance services.
The individual or legal entity on which the assessment takes place receives a letter in which, among other things, a list of documents that the tax payer is required to prepare in view of the assessment phase is also indicated. Sometimes the IRS accepts documents sent by e-mail, but in most cases, the production of paper documents is required.
In cases of verification, the tax payer has certain rights towards the IRS.
• Be treated in a professional and courteous manner by the IRS staff.
• Confidentiality regarding the contents of tax returns.
• To be informed about the reasons for the requests, about the ways in which the requested documents will be used and, above all, the consequences if these documents are not provided.
• The possibility of being represented by a professional during the assessment.
• The possibility of appealing IRS decisions to the competent federal courts.
The best strategy is to answer only the questions asked and provide the requested documents, it is not recommended to go beyond the requests and produce other documentation on a voluntary basis.
At the end of the assessment there can be three solutions:
• No change: no document, after the revision, requires a modification of the declarations object of the assessment.
• Agreement: the IRS proposes changes to the declarations and the tax payer declares his agreement with them.
• Disagreement: the IRS proposes changes, but the tax payer does not agree.
If there is disagreement, you have the right to appeal the decision. Within the IRS, there is an independent entity, the so-called Appeals Office, which helps to find an agreement between the tax payer and the IRS. It is an impartial organization that maintains equidistance with the tax payer and with the tax authorities.
The Appeal procedure begins with a written protest protest, and there is the possibility to present yourself in person or to be assisted and represented by a professional.