An Internal Revenue Service audit is something most, if not all, Texas residents dread, which is why worrying about it is only natural. People hold on to receipts and other paperwork for ages in fear of one, but how long should a person worry about an audit and hold on to documentation?
Generally, the IRS has around three years after a filing to audit the filer. However, it is important to know that there are certain exceptions to the basic rule that can increase the time limit to six years or more. First, if more than 25 percent of the filer’s income has been omitted, then the time limit to audit someone increases to six years. “Omit” is more broad than simply leaving off or neglecting to report income. According to the IRS, it also means reporting that has the same effect as omission.
If a tax return has been filed fraudulently or has never been filed, the IRS may have no time limit. Similarly, if some tax forms are not filed, the IRS may have no time lime to conduct an audit. Once a tax assessment has been made, the IRS collection statute is around 10 years, which can often be renewed.
With tax season upon Texas residents, it is important to know what paperwork to hold on to and for how long. If someone is being audited, it is important to know the law surrounding the time limit the IRS has to audit and IRS audit defense and appeals options.