Accuracy-related penalties

i Negligence penalty: 20% of the underpayment of tax due to negligence.

ii Substantial understatement penalty: If the amount of the tax

understatement exceeds the greater of: (1) 10% of tax due; or (2) $5,000 ($10,000 if taxpayer is a corporation), a 20% penalty on the understatement may be imposed unless the taxpayer has: (1) substantial authority; or (2) a reasonable basis for the tax treatment of the item creating the understatement and it is disclosed on Form 8275 or Form 8275R.

iii Substantial valuation misstatements penalty: If a taxpayer over values property, which is deducted on his tax return, and the over valuation is 150% or more, a 20% penalty is imposed on the underpayment if the underpayment exceeds $5,000 ($10,000 if the taxpayer is a corporation). Penalty increases to 40% if the over valuation is 200% or more.

d Fraud penalty: 75% of the underpayment of tax due to fraud. 3 Statute of limitations

a The statute of limitations is the period of time beyond which no legal action or changes to a tax return may be made by the IRS or taxpayers.

i The general statute of limitations is 3 years from the later of the date

the return is filed or its due date.

ii Refund claims must be initiated by a taxpayer within 3 years of the

later of the date the return is filed or 2 years from the date the tax is paid.

iii The statute of limitations increases to 6 years from the later of the date the return is filed or its due date if the taxpayer omits gross income in excess of 25% of the gross income reported.

iv The statute of limitations never runs if the taxpayer files a fraudulent return. The IRS can pursue the taxpayer at any time.

v The statute of limitations does not begin to run until the taxpayer files a complete return. If the taxpayer fails to file a return, or fails to file a complete return, the statute of limitation never runs.

William did not file his 2015 federal individual income tax return that was due on April 15, 2016 until June 15, 2016. William did not request an automatic extension of time to file his return. Please answer each question below and support your answers with an explanation or acalculation, whichever is appropriate.

1 When does the statute of limitations expire for Williams 2015 federal individual income tax return?

2 When does the statute of limitations expire on Williams 2015 federal income tax return if William accidently forgot to report salary income of $20,000 because he misplaced his Form W-2 from his employer? Assume that William reported gross income of $75,000 on his 2015 federal income tax return.

3 Assume the same facts as in 2 above except that William fraudulently failed to report a $20,000 cash payment (rather than $20,000 of wages on Form W-2) he received for work he performed because he thought the IRS would not find out about the income. When does the statute of limitations expire for Williams 2015 federal income tax return?