How far back an IRS audit goes depends on the specifics of your case. Although the typical audit statute of limitations covers three years, tax audits can go back as far as six years or even indefinitely. If the IRS finds significant errors on your return, they will add additional years to the timeline.
The IRS states on its website that they usually won’t go back more than six years except in cases of tax fraud or when a taxpayer fails to file multiple returns.
What Years Can the IRS Audit?
You have an obligation to file a tax return each year unless your income is less than $400 in self-employment income. Even in this case, you may have to file based on other 1040 requirements. Therefore, the IRS can audit a taxpayer any year or several years in a row. It’s also possible you could be audited on a single issue several times in a row.
Can the IRS Extend the Audit Statute of Limitations?
The statute of limitations for audits often spans a total of three years from the time you file your tax return. If you file a tax return earlier than the April deadline, the statute of limitations goes three years from the tax filing deadline, not your filing date.
The IRS can extend this timeframe for specific reasons, including when it identifies a significant error. When the IRS wants to assess older tax returns, they will request that you allow them to audit past the original statute of limitations date.
Do Taxpayers Have the Right to Deny the IRS More Time?
As mentioned earlier, the IRS may contact you to request that you sign a form extending the statute of limitations for an audit. Although you don’t have to agree to the extension, extending it can benefit you. An extension typically gives you more time to obtain additional documentation to support your position. You also get extra time to request an appeal if you need one or to claim a tax refund.
What Tax Matters Can the IRS Audit Indefinitely?
- Unfiled Tax Returns: When you fail to file a tax return, the statute of limitations for that tax year won’t start before you file. Until you file the missing tax return, the IRS has infinite time to audit.
- Fraud or Tax Evasion: When the IRS has knowledge and information that a taxpayer has acted fraudulently when filing a return, the agency can go back as far as it wants to audit that taxpayer. It is presumed the IRS has a right to investigate the issue fully and get to the bottom of the matter.
- Failure to File Form 8621 or Omitting Foreign Income: When a taxpayer has a Passive Foreign Investment Company and fails to file Form 8621, that specific return remains open. Also, if a taxpayer excludes foreign income of more than $5,000 on their return, the audit statute of limitations is indefinite.
Can the IRS Audit You Two Years in a Row?
Yes, the IRS can audit you for two years in a row if it finds a reason to. Actually, the IRS can audit a taxpayer two years in a row, or three, or four, or ten, or even every year.
How Can Wiztax Help?
Filing a complete and accurate tax return each year is the best way to avoid an audit. Call us today at (866) 568-4593 to see how we can help.
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