Statute of Limitations for IRS Audits Stands at Three Years
If you’ve ever had to work for a living chances are you probably hated one of your bosses over the years. But you’d probably think differently if that boss was a complicated tax shelter saving you millions of dollars.
Son of Boss tax shelters have cost Uncle Sam a lot of money. They’re some of the costliest and most complex tax schemes out there. And thanks to the Supreme Court the IRS has less time for its agents to find and unravel them.
They’ve been around for several years. “Boss” stands for “bond option sales strategies.” They work by inflating a property’s reported purchase price to reduce the capital gain and resulting tax bill.
After its first five years cracking down on Son of Boss, the IRS settled with more than 1,100 people. But their complexity made it too difficult for IRS agents to wrap their heads around – and prove in court.
So when the IRS tried extending the time period to audit businesses from three to six years, a Supreme Court shut them down. IRS agents audited a pair of coal miners who set up a limited liability company for their Son of Boss scheme. They owed $6 million after getting audited for a tax return six years later.
But the pair of businessmen sued the IRS claiming violation of its three-year statute of limitations. The IRS countered that it had six years. The Supreme Court’s 5-4 decision kept it at three, with implications for other tax scheme cases.
Tax schemes may help bosses avoid taxes in the short-term, but chances are the IRS will sniff out the funny business and hand out a back tax bill. Owing back taxes puts any individual or business on financial thin ice, but hiring a tax attorney or seasoned tax professional helps you become a boss all workers can look up to.
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