According to CBS News, filing your tax returns could raise the question of how long you should keep them, just in case the IRS decides to audit. If you come across this issue, it is important to be aware of the three types of statute of limitations. This is found under the Internal Revenue Code, provided by Section 6501.
The first is a three-year statute of limitation on tax audits. Filing a tax return on extension has the downside of also extending the time your return is subject to an audit. For example, filing a tax return for 2011 on April 15, 2012 would give the IRS exactly three years to audit it. However, if you request an extension and file on Oct. 15, 2012, the IRS will still receive exactly three years after that date to audit your return.
Section 6501 also states a second statute of limitations. Overestimating your cost basis or holding securities for a long period of time could bring forth underreported income. This could result from taxpayers neglecting a gross income that surpasses 25 percent of what was originally stated. In this case the three-year limit is doubled to six years.
Assessing a tax return has no time limit if a return is false or fraudulent according to the third statute of limitations. This will also occur if no tax return is filed at all.
Having a good understanding of these three bills as well as an effective tax attorney, can prevent future questions or frustrations with filing tax returns.
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