How long does the IRS have to complete an audit?

October 04, 2019 by Carolyn Richardson, EA, MBA
clock on an audit report

You’ve received the dreaded letter from the IRS, telling you that your most recent tax return has been selected for audit. “Great,” you think to yourself. “I wonder how long this is going to take?”

We wish we could tell you that it will all be over fairly quickly, but the sad fact is that there is no standard answer to how long it will take for the IRS to finish up your audit and tell you what, if anything, you owe. Generally, there is a three-year statute of limitations on the time the IRS has to assess additional taxes, which basically means that after you file your return on April 15, the IRS has three years from that date to determine if you owe them additional money, or if you are due an additional refund. This gives them time to compare what was reported on your return versus what was reported directly to the IRS from employers, banks or investment firms, clients, or other third parties, and also to assess your overall return to determine if something looks out of place or incorrect.

The IRS will always begin the audit within the three-year time frame, but from there, how far out the actual end will be is hard to determine. For correspondence audits, which account for about 70% of all the audits done by IRS, it will likely take at least three months to receive a reply, and that’s if you promptly provide all the required information to the examiner on the first try. If you have to send additional documents later, this back and forth can go on for well over that time frame. There aren’t enough auditors to review all the replies quickly, and it may be 60 days or more after they receive your reply to even look at the information you provided.

If you’re fortunate enough (or unfortunate enough, depending on your point of view) to have a face-to-face audit with either an office examiner or field agent, the initial start of the audit goes much faster. But because the IRS generally reserves these types of audits to more complicated issues, it may still drag out for months or even years depending on what the audit is focusing on, how accurate and complete your records are, and how “grey” of an audit area is involved.

If the IRS cannot resolve the audit within the three-year timeframe, they will ask you to agree to a longer period of time. This is called a “Consent to Extend the Statute of Limitations,” and generally they will request an additional year or two for most audits, although they can request extensions multiple times or even for an unlimited period of time. If you don’t agree to this extension, they will wrap up the audit based on what has already been provided by you to support the numbers on your return, and that’s not likely to be in your favor.

In rarer cases, the IRS has longer than three years. If you substantially understate your income, such as not reporting a large pension distribution because you never received the Form 1099-R, the statute can be automatically extended to six years. And if you deliberately understate your income through tax fraud, there is no statute of limitations at all and the IRS can audit you for many years.

So, the answer to how long will it take for the IRS to audit you is “It depends.” If your return is accurate to the best of your knowledge and ability, and you keep all your supporting documents in good order, the audit should be quick and relatively painless. If things get messy, though, it may be months and even longer before you see that light at the end of the tunnel. To avoid having that light feel like an oncoming train, you may want to look into having someone represent you.

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Tags: audit, IRS audit

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Carolyn Richardson, EA, MBA
Learning Content Managing Editor

 

Carolyn has been in the tax field since 1984, when she went to work at the IRS as a Revenue Agent. Carolyn taught many classes at the IRS on both tax law changes and new hire training. In 1990, she left the IRS for a position at CCH, where she was a developer on both the service bureau software and on the Prosystevm fx tax preparation software for nearly 17 years. After leaving CCH she worked at several Los Angeles-based CPA firms before starting at TaxAudit as an Audit Representative in 2009. Carolyn became the manager of the Education and Research Department in 2011, developing course materials for the company and overseeing the research requests. Currently, she is the Learning Content Managing Editor. 


 

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