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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4322
Experience:  35 years tax experience, including four years at a Big 4 firm.
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The IRS started an audit on me two weeks after the three year

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The IRS started an audit on me two weeks after the three year statute of limitations passed and spent 5 months on it before discontinuing. I was unaware of the statute. They now tell me that at the time the audit stopped, I owed additional taxes, though it wasn't finished and I had not agreed with all of the figures. Therefore, they won't issue me any refund that was due with the return, but aren't going to make me pay the additional tax. Can these figures be used at all since the statute of limitations had passed before the audit began. It is not so much about the money with me as it is that the Service chose to ignore the statute and proceed without telling me about the it. They had 20 months from the time they received the amended return before the statute ran out and I made 5 documented attempts to get the audit started.

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Hi Randy,

It sounds like IRS is playing some games with your refund claim. I don't know if either your original return or the amendment included a request for prompt assessment, but that's one of the two things IRS can argue in this case. The other is that they never received your amended return, and as such never had to extend the examination statute.

Since you filed an amended return during the three year statute, such a filing extends the examination statute (if you can prove you filed it).

I would start by getting a copy of your transcript for the year in question. IRS has to provide you one, but I would make the request in writing. Don't do anything until you get this.

More in a moment...
Once you have the transcript, look for evidence that an amended return was filed and a revised tax assessed. I bet it won't show up on the transcript at all.

Your next choice is based on whether or not the amendment was received and a revised tax assessment made. If so, the transcript would then show any administrative action taken to reject the filing.

If the amendment does not show up, if you can prove you filed it, now decide if you want to pursue this. You should be able to do it yourself.

You could go to Appeals and argue your claim, but if no amended return shows up, they could argue they have no jurisdiction.

The last place I would try is the taxpayer Advocate office, or TAO. Completing and filing form 911 will get an advocate looking into your case.

I have had great results with Advocates; they are among the Service's best and most knowledgeable people. Their mandate is to look into things, and process cases quickly and keep taxpayers informed.

I hope this gives you some insight and options about what to do next. Thanks from Just Answer/Pearl. Please ask follow up questions, or leave positive feedback to close out your question.
Customer: replied 4 years ago.

The tax year is 2008. It was filed on time, making the statute of limitations run out on 4/15/12, from all I have read. They received the amended return on 8/16/10. That still has the statute of limitations at 4/15/12, according to everything I have read. If I am correct, the only time an amended return extends the statute of limitations is if it is filed 6 months prior to the statute end and then only by 6 months. This was not an issue in my case. I think the TAO may be a good option. How do I contact it? In your opinion, since they started the audit after the statute ran out are they still able to use that information?

Randy,

They could take the position that the amended return was not filed, and try to close out the audit (and keep refund money due you). The amended return filing extends the statute itself for three years from the date the amendment is filed. It may not extend the statute for issues not revised in the original return, which may be the reason for the IRS position.

In this case, you may have a win because your amended return is correct, and another win because losses in your original filing may not be open for review. I don't have all the facts in front of me, but this is a possibility...

Contact TAO by looking up Taxpayer Advocate on the IRS website. Mailing address, fax for submission of the 911 and any support are provided.

Good luck, and thanks again for the accept and the great question.