Tax Strategies Flashcards

What is the general assessment statute of limitations when a taxpayer omits more than 25% of gross income stated on the return?

Answer: 6 years

IRC Section 6501(e) extends the assessment period to 6 years for substantial omissions exceeding 25% of gross income.

How long may the IRS assess tax when a fraudulent return has been filed?

Answer: No time limit

Under Section 6501(c)(1), tax may be assessed at any time when a false or fraudulent return was filed with intent to evade.

What is the general statute of limitations for prosecuting criminal tax evasion under IRC Section 6531?

Answer: 6 years

Section 6531 provides a 6-year limitations period for most criminal tax offenses, including evasion.

Which IRC section makes it a felony to willfully sign a return the taxpayer does not believe to be true and correct as to every material matter?

Answer: Section 7206(1)

Section 7206(1), the 'tax perjury' statute, does not require proof of a tax deficiency.

Willful failure to file a tax return under IRC Section 7203 is classified as what?

Answer: A misdemeanor with up to 1 year imprisonment

Section 7203 failure to file is a misdemeanor punishable by up to 1 year imprisonment.

Under the bank deposits method, which item must be subtracted from total deposits to avoid overstating income?

Answer: Transfers between the taxpayer's own accounts

Inter-account transfers and redeposits are non-income items that would double-count receipts.

Which indirect method is most useful when a taxpayer spends cash lavishly but has little visible asset accumulation?

Answer: Expenditures (source and application of funds) method

The expenditures method compares spending to known sources of funds and suits consumption-heavy taxpayers.