On a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount...

 

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On a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount (more than 25%) of gross income. a. Respond to Andy as he is seeking your advice as to whether the IRS is barred from assessing additional income tax in the event he is audited. Because a six-year statute of limitations applies to a substantial omission of gross income, the IRS can income tax in the event Andy is audited. assess additional b. Assume you were the person who prepared the return. Should you make a disclosure to the IRS regarding the omission on Andy's prior tax return? Yes, it is your obligation to make the disclosure. c. Andy has asked you to prepare his current year's return. Regarding what to do, identify each of the following as either "Yes" or "No". 1. Prepare the return using the information Andy gives you since it is the client's decision to make the disclosure. 2. Withdraw from the engagement if Andy did not make the disclosure and the omission has a carryover effect to the current year. Yes 3. Disclose the omission and then, making the carryover effect correction, file the current year's return. Yes On a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount (more than 25%) of gross income. a. Respond to Andy as he is seeking your advice as to whether the IRS is barred from assessing additional income tax in the event he is audited. Because a six-year statute of limitations applies to a substantial omission of gross income, the IRS can income tax in the event Andy is audited. assess additional b. Assume you were the person who prepared the return. Should you make a disclosure to the IRS regarding the omission on Andy's prior tax return? Yes, it is your obligation to make the disclosure. c. Andy has asked you to prepare his current year's return. Regarding what to do, identify each of the following as either "Yes" or "No". 1. Prepare the return using the information Andy gives you since it is the client's decision to make the disclosure. 2. Withdraw from the engagement if Andy did not make the disclosure and the omission has a carryover effect to the current year. Yes 3. Disclose the omission and then, making the carryover effect correction, file the current year's return. Yes