How Far Back Can IRS Audit

How Far Back Can IRS Audit

Facing a tax audit can be nerve-racking, however, being familiar with the IRS timelines and statutes can be useful in knowing how soon the nightmare will end.

  • The standard deadline for how far back the IRS can conduct an audit is three years from the April due date for filing a tax return

  • If an extension for filing a tax return is granted, it is three years from October of the year for that tax return filing

  • For tax returns where the reported income omits more than 25% of the income earned, the IRS has six years to conduct an audit

  • The IRS has six years to audit tax returns that omit over $5,000 of foreign income

  • There is no deadline for when audits can be conducted on fraudulent tax returns

  • The number of years for when a tax audit occurs begins when the tax return is filed and as such, if a taxpayer fails to file a return, then this will extend the audit deadline indefinitely or until the return is later filed

By equipping yourself with the right information, you can better find help with tax audit concerns and tax problems or related tax situations. A good starting point in educating yourself about the audit is to first understand the basics of an audit, so, it is a good idea to start with knowing the number of years the IRS can decide to audit tax returns and the basics of a tax audit.

Basics of Tax Audits

The United States tax agency, also known as the Internal Revenue Service or IRS, performs occasional audits on the returns submitted by taxpayers to identify potential errors in how income was reported and compliance with U.S. tax laws.

Although it is scary for many to receive a letter from the IRS stating that they are the subject of a tax audit, it is important to note that this does not always indicate that there was an issue with your tax return.

Audit Selection Process

A tax refund will not trigger a tax audit and neither will the filing of an amended return. The IRS clarifies on its official webpage that the selection of possible audit candidates includes both random selection and related examinations on other taxpayers that share a transaction or similar concern.

After the initial selection, there is a review process to determine which taxpayers will have a tax audit performed. They are notified by mail.

Amended Tax Returns

Another important thing to note is that filing an amended tax return will not impact whether an original tax return is audited. Additionally, the amended return will go through the same screening procedure as the original audit and so filing an amended return can also result in a taxpayer receiving a letter from the IRS informing him or her that the tax return is being examined.

Information Requested in an Audit

As part of the audit process, the IRS will request additional information to explain or support items or deductions reported on the taxpayer’s tax return. The information required and the method for submitting it will be in the letter that the IRS mails to a taxpayer involved in a tax audit.

Time Limits for the IRS to Perform an Audit on a Tax Return Filed

The general rule for the deadline the IRS has with a tax audit is three years from the due date of the tax return. That is usually three years from April of the year that the tax return is filed.

The IRS states that it tries to audit tax returns filed as soon as possible and so most are done within two years. However, substantial issues, late filings, fraud and unreported income that exceeds a certain threshold can extend the statute of limitations that the IRS has for auditing a tax return. Some tax situations extend it to six years or more.

When to Seek Help from a Tax Professional

If you are concerned about a possible audit and think it may end up in owing additional money to the IRS, then you may want to consider seeking help from an experienced tax professional that specializes in tax resolution. They can help you understand the information that the IRS is requesting as part of the audit, the timeline and the deadlines for filing the response to the request for supporting documents to items on a submitted tax return, and the best way to present this information to maximize your chances of an easy audit process.

Calculating When the Clock Begins to Start

The standard deadline for when the IRS may examine a tax return is three years from the due date of that year’s tax returns, which is typically April 15th. This means that the IRS usually has three years from the month of April that a tax return was due to conduct an audit.

The April three-year rule applies even if you file early. As such, if you filed your 2019 tax return before the due date of April 15th, the IRS has until April 2022. For example, if you filed your return in January, then the IRS still has until April 2022 and so the deadline for auditing is extended by a few months.

Tax Returns Filed After the Due Date

There are other deadlines for a tax audit in situations where the tax return is filed past the due date. If you do not file a tax return, then there is no time limit for the IRS to conduct an audit. If you file your tax return late, then the IRS has three years from the date that you filed your late tax return to audit you. If granted an extension, the IRS has three years from October to audit that tax return.

Exceptions to the Three-Year Time Limit

Some exceptions allow the IRS to conduct an audit on a tax return filed up to six years ago. These include audits for the following tax situations;

  • A return omitted over 25% of a taxpayer’s actual income;
  • Unreported foreign income exceeds $5,000;
  • A tax return was fraudulent or filed with false information.

When the taxpayer failed to report more than 25% of his or her actual income or over $5,000 of foreign income, then the deadline for an audit is six years. If the tax return was fraudulent or false, then there is no deadline for when the IRS can conduct a tax audit for that tax filing.

Also, some states may have longer deadlines for when the state tax agency can audit a tax return previously submitted.

Additionally, for taxpayers that request an extension to the April due date, the audit deadline is three years from October of the year that the tax return was filed

Tax Refunds and Audits

Taxpayers have three years from when they filed a tax return to submit an amended filing requesting an additional tax refund. This corresponds with the typical deadline for when the IRS can examine prior tax returns during the audit process.

However, the IRS may sometimes extend this deadline and allow a taxpayer to submit additional information supporting tax refunds requested in filing an amended tax return beyond the standard three-year period.

Key takeaway on what happens during the audit:

  • If your tax return is selected for an audit, then you will be notified by mail. This will tell you what items on your return the IRS needs additional information.
  • You will either reach a resolution or may go through the IRS collections process.
  • You can appeal the decision at the conclusion of an audit.
  • If the IRS auditor detects that you made significant misrepresentations or if you are not able to substantiate your expenses, they can decide to audit additional tax ears.
  • The IRS has very specific tactics for asking questions that seem simple but in fact, are leading you to divulge underreport income or assets and overstated expenses. It is important that you contact an experienced tax audit professional to help you mitigate your IRS audit risks.

Visit the IRS website that describes the process further.

Finally, if you need further help with a tax audit then you should obtain advice from a tax professional.


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