Question 1

A taxpayer filed their Year 1 individual income tax return on March 15, Year 2. The return showed a gross income of $100,000. The taxpayer inadvertently omitted $26,000 of gross income from the return. No fraud was involved. What is the latest date the IRS can assess additional tax for Year 1?

Accepted Answer

Step 1: Determine the start of the statute (later of due date or filing date). Step 2: Calculate omission % ($26k/$100k = 26%). Step 3: Apply rule (3 years normally, 6 years if >25% omission).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the filing date (March 15) instead of the due date (April 15) for early returns; failing to check the 25% omission test.

A taxpayer filed their Year 1 individual income tax return on March 15, Year 2. The return showed a gross income of $100,000. The taxpayer inadvertently omitted $26,000 of gross income from the return. No fraud was involved. What is the latest date the IRS can assess additional tax for Year 1?

How to approach this question

Full Answer

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