CDZ Once again, Trump shows us he has no regard for even his own tenets - SCOTUS

Are you saying that if Trump has failed to report 25% or more of his income, that the IRS will give him the chance to fix it? Don't you get in trouble for that or something?

The red and blue text is clearly related. Please completely read both sets of comments before replying.

Red:
At a very highly summarized level, yes, but the way you phrased it in your question isn't at all how I'd put it. The way the process works isn't simple enough to present the matter as your question does to folks of whom one knows nothing about their understanding of accounting, the tax code, tax litigation options and procedure, and IRS audit procedures.

I'm saying:
  • Eight years is not a typical time span for a given IRS audit and something unusual is in play when an audit does go back eight years. The same would be so were the audit to span seven, nine, ten, a dozen, etc. years.
  • The complexity of a taxpayer's return is not a driving factor in the determination of how far back an audit spans. The nature of "mistakes" the IRS suspects exist is.
  • It's something I know is one of the special circumstances that can make an IRS audit span back eight years (or more) rather than the somewhat uncommon six years back maximum and typical three years back.
  • I know that the hospitality and real estate development business offers many opportunities to hide (understate) income, overstate expenses, and present the circumstances of transactions in uncommonly favorable lights that, if one is to accept them as valid (i.e., they comply with the tax code), one must willingly suspend large amounts of disbelief. The "opportunity" to do those things is even greater when the company is very closely held and entirely private, both being characteristics of Trump Organization.
  • Taxpayers under audit are permitted to submit amended returns and adjust their refund or tax payment accordingly. Obviously, the "mistakes" that were present in one's original return would not appear in the amended return. One can file one or hundreds of amended returns during the course of an audit.

    Obviously, what motivates one to file an amended return quite often is information that comes to one's attention during the audit. The nature of that information varies. It may be that one learns what items trouble the IRS and that the tax court has in the past agreed with the IRS, not the taxpayer, on similar items in the past. It might be truly new data of which one was indeed unaware at the time of the initial filing. It could be a host of other things too.

    At the end of the day, if the IRS is satisfied that one's amended return is sufficiently compliant with the applicable tax provisions in force for the period covered by the return, they will end the audit, assess penalties and interest as they see fit, and that's that so long as one pays.
There are other situations that permit the IRS to go back farther than six years, but they too are rarefied.


Red "chance to fix it" and Blue:
Assuming the IRS determines that one has failed to report 25% or more income and one doesn't appeal/contest the finding in tax court, the "chance to fix it" generally consists of one's paying the tax owed plus penalties and interest, which, for most folks who end up owing the IRS as a result of audit findings, is the typical extent of "trouble" or "something" they are in after the audit is finished or while the audit is underway.

For some folks the "chance to fix it" entails jail time, but that depends more on the taxpayer/tax evader than anything else. The IRS doesn't want to put folks in jail over tax issues, but if there's no workable alternative, it will. (Generally speaking, a person needs to do more than just be ultra-aggressive in one's use of tax code provisions to minimize one's tax bill for jail time to realistically be "on the table.") After all, people usually generate less income in jail than they do outside of jail. That in turn means the government stands to collect more revenue in the subsequent years by not jailing people. LOL

Remember, the IRS' middle name is "Revenue" and their goal is to maximize the revenue the federal government collects given the laws in force at the time. Similarly, the IRS applies "reasonableness" and "materiality" assessments in determining how aggressively it will pursue an audit. Accordingly, the IRS isn't generally going to spend more to perform an audit than they anticipate they can collect from the audited taxpayer.
 
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