Question

For the 2016 tax returns, indicate when the statute of limitation expires and why?

1) Simon filed his tax return on April 10, 2017.
2) Billy and Barbara filed their tax returns late on December 1, 2017.
3) Pearson earns a living through various illegal activities. He filed his tax return on March 14, 2017 but did not report his illegal income on his tax return.
4) Luther filed his tax return on July 17, 2017 but has accidentally underreported his taxable gross income by 20%

Answer 1

The statute of limitations for tax returns depends on the filing date and any errors or omissions made. For the 2016 tax returns, the statute of limitations expires on different dates for different situations, ranging from three to six years from the filing date.

Step-by-step explanation:

The statute of limitations refers to the time period during which the government can audit and make changes to a taxpayer's return. For the 2016 tax returns:

1. Simon filed his tax return on April 10, 2017. The statute of limitations expires on April 10, 2020, which is three years from the filing date. This is the standard time limit for the IRS to make changes to a return.
2. Billy and Barbara filed their tax returns late on December 1, 2017. Since they filed after the regular due date, the statute of limitations for their return expires on December 1, 2020, three years from their filing date.
3. Pearson filed his tax return on March 14, 2017, but did not report his illegal income. In cases where there is a substantial omission of income, the statute of limitations is extended to six years. So the statute of limitations for Pearson's return expires on March 14, 2023, six years from the filing date.
4. Luther filed his tax return on July 17, 2017, but underreported his taxable income. Since he made an error on his return, the statute of limitations is extended to six years. Therefore, the statute of limitations for Luther's return expires on July 17, 2023, six years from the filing date.