Re: Statute of limitations
posted at 6/26/2013 6:21 AM EDT
In response to dehcpa's comment:
Are you aware of a way to go back more than 3 years to claim a refund? Taxpayer made significant bookeeping errors for 10 years essentially doubling a certain amount of sales each year in their small business. Their tax preparer did not pick up on it at all (and probably should have, as AR was increasing each year and they are a type of business that should have minimal AR).
They discovered the error by chance, and the tax preparer amended the 3 years that are open, and indicated that there would be a way to go back more than that, referencing the use of a taxpyer advocate.
I think they are out of luck. Any thoughts?
Sorry, but to the best of my knowledge, there is no way to go back beyond three years.
Sometimes, such as correction of cumulative depreciation errors, there is the means to make a correction, but not here. Even assuming a change in accounting method from cash (the presumed method) to accrual (since you mention AR), the normal result would be to INCREASE income, where you're seeking to REDUCE it for prior over-reporting. The only thing that you might expolore is whether or not there is an argument to be made for relief under the provisions of Section 1341 - the Claim of Right provisions. I don't think that it applies, as it is predicated on receipt of an item that is initially reported as income under the impression that it is legitimately the taxpayer's, but later turns out to belong to someone else. What you're missing here is the "someone else".
The Taxpayer Advocate (TA) is available to alleviate an eggregious situation where you believe that the taxpayer's position is correct, but s/he can't get any traction in getting the IRS to accept that position to alleviate the taxpayer's situation. Without some means to access the earlier years under statutory provisions, the TA won't bet involved.
Good luck with your situation and here's hoping this helps!
Mark H. Misselbeck, C.P.A., M.S.T., Tax Principal
Katz, Nannis + Solomon, P.C.