Question

In March 2019, Jim asks you to prepare his Federal income tax returns for tax years 2016, 2017, and 2018. In discussing this matter with him, you discover that he also has not filed for tax year 2015. When you mention this fact, Jim tells you that the statute of limitations precludes the IRS from taking any action as to this year. Is Jim correct about the application of the statute of limitations? Why or why not? If Jim refuses to file for 2015, should you prepare returns for 2016 through 2018? Explain.

Answer 1

No, Jim is incorrectly applying the Statue of limitations and it would be wiser not to prepare his returns for 2016 through 2018.

Step-by-step explanation:

The IRS won't apply the Statue of Limitations in many cases, specially if a tax return wasn't filed, which is Jim's case. The IRS statue of limitations could be for up to 10 years to collect taxes weather the tax returns were filed correctly or not. Another important factor to consider is that no deadline applies to the IRS if they can prove that the taxpayer filed a false return, attempted to evade tax willfully or more importantly, failed to file a return. If you were to help Jim prepare his returns without filing for 2015, you could latter be implicated as an accomplice of Jim's fraudulent return.