(1)
Periods of audit.
a. The
department has three years after a return has been filed or three years after
the return became due, including any extensions of time for filing, whichever
time is the later, to determine whether any additional tax other than that
shown on the return is due and owing. This three-year statute of limitation
does not apply in the instances specified below in paragraphs "b," "c,"
"d," "e," "f," and "g."
b. If a taxpayer fails to include in the
taxpayer's return such items of gross income as defined in the Internal Revenue
Code, as amended, as will under that Code extend the statute of limitations for
federal tax purposes to six years, the correct amount of tax due may be
determined by the department within six years from the time the return is
filed, or within six years after the return became due, including any extension
of time for filing, whichever time is the later.
c. If the taxpayer files a false or
fraudulent return with intent to evade tax, the correct amount of tax due may
be determined by the department at any time after the return has been
filed.
d. If a taxpayer fails to
file a return, the statutes of limitation so specified in Iowa Code section
422.25 do not begin to run until
the return is filed with the department.
e. While the burden of proof of additional
tax owing under the six-year period or the unlimited period is upon the
department, a prima facie case of omission of income, or of making a false or
fraudulent return, shall be made upon a showing of a federal audit of the same
income, a determination by federal authorities that the taxpayer omitted items
of gross income or made a false or fraudulent return, and the payment by the
taxpayer of the amount claimed by the federal government to be the correct tax
or the admission by the taxpayer to the federal government of liability for
that amount.
f. In addition to the
periods of limitation set forth in paragraph
"a," "b," "c," "d," or
"e," the
department has six months after notification by the taxpayer
of the final disposition of any matter between the taxpayer and the Internal
Revenue Service with respect to any particular
tax year to make an examination
and determination. Final disposition of any matter between the taxpayer and the
Internal Revenue Service triggers the extension of the statute of limitations
for the
department to make an examination and determination and the extension
runs until six months after the
department receives notification and a copy of
the federal document showing the final disposition or final federal adjustments
from the taxpayer,
Van Dyke v. Iowa Department of Revenue and
Finance, 547 N.W.2d 1. This examination and determination is limited
to those matters between the taxpayer and the Internal Revenue Service which
affect Iowa taxable income.
Kelly-Springfield Tire Co. v. Iowa State
Board of Tax Review, 414 N.W.2d 113 (Iowa 1987). The notification
shall be in writing in any form sufficient to inform the
department of final
disposition, and attached thereto shall be a photo reproduction or carbon copy
of the federal document which shows the final disposition and any schedules
necessary to explain the federal adjustments. The notification and copy of the
federal document shall be mailed, under separate cover, to the Examination
Section, Compliance Division, Iowa
Department of Revenue, P.O. Box 10456, Des
Moines, Iowa 50306. Any notification and copy of the federal document which is
included in, made a part of, or mailed with a current year Iowa franchise
tax
return will not be considered as proper notification for the purposes of
beginning the running of the six-month period.
When a taxpayer's income or loss is included in a
consolidated federal corporation income tax return, notification shall include
a schedule of adjustments to the taxpayer's income, a copy of the revenue
agent's tax computation, a schedule of revised foreign tax credit on a separate
company basis if applicable, and a schedule of consolidating income statements
after federal adjustments.
g. In lieu of the above periods of limitation
for any prior year for which an overpayment of tax or an elimination or
reduction of any underpayment of tax due for that prior year results from the
carryback to such prior year of a net operating loss or net capital loss, the
period shall be the period of limitations for the taxable year of the net
operating loss or net capital loss which results in such carryback.
h. The
department may, at any time within the
period prescribed for assessment or refund adjustment, make a supplemental
assessment or refund adjustment whenever it is ascertained that any assessment
or refund adjustment is imperfect or incomplete in any respect.
If an assessment or refund adjustment is appealed (protested
under rule 701-7.9 (17A)) and is resolved
whether by informal proceedings or by adjudication, the department and the
taxpayer are precluded from making a supplemental assessment or refund
adjustment concerning the same issue involved in such appeal for the same tax
period unless there is a showing of mathematical or clerical error or a showing
of fraud or misrepresentation. Nothing in this rule shall prevent the making of
an assessment or refund adjustment for the purpose of taking into account the
impact upon Iowa net income of federal audit
adjustments.
(4)
Amended returns filed within 60
days of the expiration of the statute of limitations for assessment.
If a taxpayer files an amended
return on or after April 1, 1995, within 60 days
prior to the expiration of the statute of limitations for assessment, the
department has 60 days from the date the amended
return is received to issue an
assessment for applicable
tax, interest, or penalty.
This rule is intended to implement Iowa Code sections
422.25 and
422.66.
