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The basics of voluntary tax compliance

As we begin this blog post, we hope that our readers had a happy and plentiful Thanksgiving. Now we enter what is commonly known as “the most wonderful time of the year.” Indeed, retailers want you to believe so because of all of the deals that can be had at the mall (or online). If you are a small business, it is the best time of the year because it is the final push to make the best of the year. For consumer taxpayers, it is the anticipation of w-2 notices based on end-of-year bonuses.

Indeed, most people won’t receive their w-2’s until the last week of January; but it is a taxpayer’s responsibility after receiving it that is important. This post will explain why. 

Essentially, all taxpayers are required to follow the “voluntary tax compliance” system. It is basically the “honor system” for truthfully and accurately reporting income,  as well as calculating the proper tax due. Assumed in this system is the right of the IRS to audit tax returns. After all, the federal government has a vested interest in ensuring that all taxpayers honor the system.

This means that the IRS has the authority to review your return and analyze it to determine whether you incorporated improper deductions or did not properly report your income.

If the IRS finds that additional taxes are due, there is generally a three-year window in which the IRS can in order to bring an action to collect. Once the window closes, the IRS basically loses its right to collect. In the same vein, you lose your right to collect a refund on a tax return that is more than three years old.

These are just a few things to consider when tax season begins. If you have questions, an experienced attorney can help.

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Law Offices of Charles R. Frazier
5258 Murfreesboro Road #B
La Vergne, TN 37086

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