REG 2 Individual Taxation: Other Items

Question 1

What is the statute of limitations on assessments?

Answer 1

The statutory period during which the government can assess an additional tax.

1. General: 3 years from the later of: the due date of the return or the date of the return is filed (including amended returns).
2. 25% understatement of gross income: 6 years from the later of the due date of the return or the date the return is filed.
3. There is no statute of limitations for fraud or filing false returns.

Question 2

What is the statute of limitations on refunds for individuals (Form 1040x)?

Answer 2

The statutory period during which the taxpayer can claim and receive a refund.

1. Refund claim: The later of 3 years from the date the return was filed or the original due date of the return Or 2 years from the time the tax was paid (if not when the return was filed).
2. Bad debts, worthless securities: 7 years from the later of the due date of the return or the date the return was filed.

Question 3

A taxpayer is required to make estimated quarterly tax payments if both of what conditions are met?

Answer 3

1. The amount of taxes owed (excess of liability over withholding) is expected to be more than $1,000.
2. If the taxpayer’s withholding is less than the lesser of: 90% of current year’s tax or 100% of last year’s tax. (Exception: If AGI exceeds $150,000/married filing separately $75,000 in the prior year, 110% of the prior year’s tax liability is used to compute the safe harbor for estimated payments).