MikeG62 wrote: ↑Tue Nov 24, 2020 2:29 pm
neverpanic wrote: ↑Tue Nov 24, 2020 11:30 am
MikeG62 wrote: ↑Tue Nov 24, 2020 8:24 am
Similar thread here from 2019:
I'll repeat here what I said in that thread...
Retired finance guy (started my career in public accounting (and passed the CPA exam) as a financial accountant and not tax accountant). I am familiar enough the tax rules and as a result have always done my own taxes.
My father-in-law uses an accountant to do his taxes. Loves her. She's very aggressive in taking deductions. He sees this as wonderful. He's done consulting for a number of years, but for one company out of their office (never done anything from home). Yet his accountant has him convinced that he can take a home office deduction. I've talked to him about this and shown him the rules - it's clear he does not meet the criteria to take a home office deduction. Despite this he continues to take the deduction because his accountant has told him it's ok. I've pointed out the multi-year risk he'd face on audit, but none of that dissuades him.
SIL and BIL use the same accountant. Same thing for them - she claims all sorts of what I would consider highly aggressive/questionable deductions. Like my FIL, they think she is great.
I provide these examples to show that some accountants are super aggressive and their clients (most of whom don't know any better) think they are wonderful because they claim lots of garbage deductions and get them larger refunds - much larger than they'd ever get if filing on their own.
How many audits have these family members been through?
None, yet. But that does not mean there is no exposure. And if they do get audited and the deduction is denied (which it almost assuredly will be) how many years will the IRS go back to audit from there?
I am all for taking a position, where one has a solid basis to support it. However, taking a deduction where one does not meet the criteria to qualify for the deduction seems inappropriate to me. In my FIL's defense, although he has seen the rules in this area, his view is my accountant says it's ok.
It looks like they can go back as far as they want if there is determined to be fraud.
https://www.irs.gov/businesses/small-bu ... 0deduction
Period of Limitations that apply to income tax returns
1.) Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
2.) Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
3.) Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
4.) Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
5.) Keep records indefinitely if you do not file a return.
6.) Keep records indefinitely if you file a fraudulent return.
7.) Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.