25% Gross Income Rule

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  • February 25, 2012 at 2:02 am #167014
    Soproudofmyself
    Participant

    If you understate your gross income by 25% or more because of bad estimates (so good faith estimate) –> the 6 year statue of limitation does not apply. The 3 year statue is still in affect?

    If you undertstate your gross income by 25% or more because you “omitted” it –> the 6 year statue of limitation does apply?

    Do you guys know the answer to this? Every word matters for these exams. =/

    I assumed it was 6 years for both cases but after reading further into it (online, books)…not sure now

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  • February 25, 2012 at 6:24 am #327766
    Anonymous
    Inactive

    If you omit 25% of your income, regardless of mistake/error/whatever…it's 6yrs! If you commit fraud, then it's forever!!

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