When can the IRS assess additional tax beyond the normal 3-year period?

The IRS can assess additional tax beyond the normal 3-year period when 25% or more of gross income is omitted from a taxpayer's return. This rule exists to ensure that taxpayers report their income accurately and fully. If a significant portion of income—specifically, 25% or more—is not reported, the IRS has the right to extend the assessment period to five years. This extension is intended to allow the IRS sufficient time to investigate discrepancies and make sure that taxpayers are fulfilling their obligations.

The other situations mentioned do not inherently lead to an extension of the assessment period. For example, simply initiating an audit does not automatically mean that additional tax can be assessed beyond the standard timeframe unless specific conditions like income omission are present. Similarly, a taxpayer's request for an extension typically pertains to the filing deadline, not the assessment period. Lastly, while suspected fraud can lead to additional tax assessments beyond the normal time limits, this isn't covered under the specific rule relating to the omission of income. Hence, the correct answer specifically relates to the omission of a substantial amount of gross income as a trigger for extending the assessment window.