The IRS has established 88 Information Sharing Agreements with the states, municipalities and state labor departments. They put these in place intending to use them. Every time the IRS or a state taxing authority makes a tax adjustment as a result of an audit, they automatically notify the other party to the agreement, electronically.
The taxpayer is expected to file an amended return to the taxing authority that did not audit them. Frequently the taxpayer does not want to do this. They may not want to pay the accountant the fee for an amended return. They may prefer to wait and see if and when they will get a letter demanding payment of delinquent taxes.
Rest assured, it will come.
The question is not "If" but "When ..."
The IRS and State taxing authorities do not have a 3 year statute of limitations time frame to limit them. They will wait until they get around to it. I have seen this take 4 years. It could be longer. Unseen and growing like cancer, the interest and penalties accumulate against the taxpayer. Of course, the demand for payment will come at a very inconvenient time.
The accountant should warn their client of the accumulating interest and penalties, and advise preparation of the amended return. In this way, the taxpayer takes control of their life and limits the damage from the audit.
Copyright 2017 Tax Strategies, Inc. Robert Greene CPA CMA