How Many Years Can the IRS Go Back and Audit?

The IRS can usually go back three years to audit. However, this can be extended to six years, and in some cases, there can be no time limit at all, meaning that the IRS can go back indefinitely.

An IRS audit is a serious matter, and you should contact a tax defense law firm such as Ronald Arthur Stearns Sr. PLLC as soon as possible. The sooner, the better, as we will get right to work to investigate your case and explore all possible defenses.

Utilizing over 26 years of experience and in-depth knowledge of tax laws, we will strive for the best possible resolution in your case. Whether your case involves civil or criminal proceedings, we can help protect your rights and your future.

If you have received an IRS audit letter, do not hesitate to contact our office at 210-853-2135.

The Three-Year Audit

Typically the IRS can only go back three years after you file your tax return; this is in line with the federal tax statute of limitations.

It is worth noting that if you file early, before April 15th, then the three years will still be three years before the due date and not the filing date. However, if you apply for and receive an extension for your tax return, which could be up to six months after the original due date, the three years will begin from the new filing date. On the other hand, if you did not file an extension but filed late then the three years will start from the late filing date.

The Six-Year Audit

Although the IRS can usually only go back three years to collect back taxes, there are exceptions. The IRS may extend the time to six years if:

• Unreported foreign income of $5,000 or more, including inheritances or offshore accounts.
• Your tax return indicates a significant understatement of income, usually 25% or more of your gross income.
• The IRS determines that certain items on your tax return are understated by 25% or more.
• If all the appropriate forms relating to gifts, assets, foreign income, and inheritances were not filed.

No Time Limit Audit

In some rare circumstances, the IRS can go back as far as they want to collect taxes owed. No statute of limitations may apply if:

• You do not file a tax return at all.
• You do not file a valid tax return, i.e., you didn’t sign it.
• You file a fraudulent return, such as using a fake social security number, failing to fully report your income, claiming business expenses as personal expenses, or falsely claiming deductions.

Why You Might Be Subject to an IRS Tax Audit

IRS audits can take place randomly. However, the IRS does always look for probable cause, such as:

• Under-Reported Income – The IRS will often take figures at face value. However, they do have automatic checks in place to check that reported income is in line with real earnings.
• Claiming Tax Relief When You Are Ineligible – If you claim tax relief when you are not eligible, then this could be considered tax fraud.
• Misreported Foreign Income – Foreign income and assets can make tax returns complex. If anything has been misreported, then this could trigger an IRS tax audit.
• Large Deductions – If your business deductions are noticeably higher than others in the same industry, then it could be cause for the IRS to investigate.
• Business Losses – If your business has lost money for multiple tax years, then the IRS could question how you have maintained the business.
• Something Doesn’t Add Up – Tax returns are complex, and if something doesn’t add up, then this could be sufficient to trigger an IRS audit. That is why most people seek tax advice when filing their returns.

What to do if You Receive an IRS Tax Audit Notification

If you receive a tax audit notification from the IRS, then you should contact a tax defense lawyer as soon as possible. If you don’t believe you have done anything wrong, then you may just need to provide some further information. However, an attorney can help make sure that everything runs smoothly and that your rights are protected.

If you are unsure as to whether you have filed anything incorrectly, then it is essential that you are upfront and honest with your representation. You are protected by the attorney-client relationship, which means that you can be entirely honest, and your attorney can use the information you provide them with to develop the best possible defense in your case.

Your next steps may depend on what type of audit you are facing:

Field Audit

Field audits involve an IRS agent visiting a home or business. These cases must be taken seriously, and it is highly advisable that you reach out to an experienced tax attorney.

If you are facing a field audit, then it is possible to request that the audit take place at the office of your tax attorney or your local IRS office instead of your home or business, which could give you more control of the situation. However, it is not always the best option as it could suggest that you have something to hide.

Office Audit

An office audit will require individuals to visit their local IRS office so that the IRS agent can inspect paperwork and other records in search of inconsistencies. The examiner will be looking for evidence to support a theory, and so these cases can be particularly stressful and worrying.

Fortunately, you can request that your tax defense attorney accompanies you to the office, and this is highly recommended. They will help to explain errors and will ensure that your IRS agent adheres to tax law and treats you fairly.

Correspondence Audit

Correspondence audits are usually the easiest to handle as they can often be resolved by providing further information. Often clarification can be achieved via email.

Potential Outcomes of an IRS Tax Audit

Your tax defense attorney can tell you what to expect from your tax audit, depending on your specific circumstances. Although no two cases are the same, there are some typical patterns that your attorney will look for.

The more time your attorney has to assess your case, the better chance they have at formulating a successful defense.

Some common penalties that the IRS may issue include:

Tax Court

If you are found to have committed tax fraud or tax evasion, then it is possible that the IRS will open civil or criminal proceedings. In these cases, an experienced federal tax attorney is essential. At Ronald Arthur Stearns Sr. PLLC, our attorneys are experienced litigators and will advocate on your behalf in court if necessary.

A Settlement

If you are found not to have underpaid your tax liability but are not at fault, then your tax lawyer may be able to negotiate a settlement to reduce the amount you owe.

Civil Liability

IRS agents are under no obligation to negotiate, and you may still be required to pay your tax liability in full. If you are ordered to pay your obligation in full, then your attorney may be able to appeal the decision or help you work out a payment plan.

No Further Action

An experienced attorney may fight to have your IRS audit dismissed entirely. That means no further action or payment will be required. This is not always possible, but having representation will ensure that every possible defense is explored

How Many Years Can the IRS Go Back and Audit? FAQ