How long does the IRS have to audit my tax return?

November 01, 2021 by Samantha Lamb
Statute of Limitations

It’s pretty simple, nowadays, to file a tax return. You can still manually fill it out and mail it in, but if you’re able to use a computer, you can use a program to file your return electronically. It’s easy to hit the button and imagine that the IRS looks at your return right away. Unfortunately, that is not the case! Generally, the IRS can take up to three (3) years from the date you filed to review your return. There are certain situations where the statute of limitations can be extended, and it is important to know about them.

If a substantial error is found on your return, the IRS may add additional time to review or audit your return. A substantial error, for example, would be under reporting your small business’ gross income by twenty-five percent or more. Another example of a substantial error is if a taxpayer fails to report $5,000 or more dollars of income from a foreign financial asset on their return. Typically, though, the IRS doesn’t go back more than the last six years in these cases.

If you are currently under audit, the IRS may request an extension of the statute of limitations for assessment tax. This allows you more time to provide further documentation to support your position, request an appeal if you do not agree with the results of the audit, or to claim a tax refund or credit. It also gives the IRS more time to complete the audit and process the audit results.

It is important to note that you do not have to extend the statute of limitations date when you are under audit, even if the IRS makes this request. However, if you choose to not extend, the auditor will have to make a decision based on the information provided at that point in time.

There are times when the IRS has unlimited time to review your return. If someone does not file a return for a given year at all, the IRS has an unlimited amount of time to audit and assess any tax for that year. They could potentially construct a tax return for that year using the information that they received from employers filing Forms W-2 or 1099. They will also include any income that was reported by financial institutions. When this happens, it is called a Substitute for Return or SFR, and the statute of limitations on assessing this return will not begin unless the taxpayer files their own return. If a taxpayer files a return containing false or fraudulent information for the purpose of evading taxes, the statute of limitation on assessment is unlimited.

In the event that you do receive an audit or other notice from the IRS, you will want to make sure you read the letter and respond in a timely fashion. If you are a member with TaxAudit, you will want to contact us right away so that we can get started on helping you with your notice. Our experienced Tax Professionals will help you every step of the way. If you are not a member, and are interested in our services, please check out our pre-paid audit defense membership.

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