What characterizes an "open year" for tax purposes?

An "open year" for tax purposes is characterized by a taxable year where the statute of limitations has not yet expired. This means that the IRS still has the authority to audit the tax return or make adjustments to the tax liability for that year. Typically, the statute of limitations for individual tax returns is three years from the due date of the return or the date it was filed, whichever is later. If this period has not elapsed, the IRS can review the return, leading to potential changes in the tax owed or the refund received.

The significance of this definition is that taxpayers must retain all relevant documentation for open years, as they may be called upon to substantiate claims on their tax returns if the IRS initiates an audit. Understanding which years are open helps taxpayers manage their records properly and anticipate any future inquiries from tax authorities.

The other choices may contain related concepts but do not accurately describe the definition of an "open year." For instance, pending audits, filing status, and blanket deductions refer to specific circumstances rather than the fundamental concept of the statute of limitations regarding tax years.