Financial Planner

Answer: B - Individuals that omit 25 percent or more of gross income face a statute of limitation of six years. The basic statute of limitations gives the IRs three years form the later of the statuary due date or the date on which the return was actually filed to examine a return for mistakes. The limitations are extended to six years if the taxpayer omits an amount of gross income exceeding 25 percent of the gross income reported. Thus, the government’s chasing a taxpayer’s check or mailing a refund does not mean that the IRS has accepted the accuracy of the return as filed. The is a combined penalty that equals 5 percent of the balance of tax due for each month that the return is late, up to 5 months (until penalty equals 25 percent of balance due).