Tax Audits What is the Statute of Limitations on an IRS Audit?

Generally, the IRS can include returns filed within the last three years in an audit. According to information contained on the IRS website, the IRS tries to audit tax returns as soon as possible after they are filed. This means that most IRS audits will be of returns filed within the last two years. The IRS can choose to add additional years to an audit if a substantial error is identified. In those cases, the IRS will not go back more than the last six years.

How Long Do I Have to Claim a Refund?

Just as the IRS must audit a tax return within a certain period of time, taxpayers also have a statute of limitations for claiming refunds. If you want to claim a refund for overpaid taxes from the IRS, then you must file for the refund within the later of three years from the date of the original deadline of the tax return or two years from the date the tax was actually paid.

Filing for an extension can also extend the statute of limitations for you to claim a refund. If you file for an extension and then file your tax return, you can claim a refund for up to three years after you file under the extended deadline.

Can the IRS Extend the Statute of Limitations For an Audit?

If the IRS wishes to audit your tax return for an older year, you may be requested to extend the statute of limitations for assessment of your tax return.

If the audit is not resolved and the statute of limitations date is nearing, you may be asked to extend the statute of limitations date. You do not have to agree to extend the statute of limitations date. The advantage of agreeing to extend the statute of limitations is that is gives the taxpayer additional time to provide further documentation to support your position, request an appeal at the conclusion of the audit, or to claim a tax refund or credit. At the same time, it also allows the IRS time to complete the audit and process the results of the audit.

If the IRS requests you to extend the statute of limitations for your assessment but you do not agree, the auditor will make an audit determination based upon the information they currently have.

Are There Exceptions to the Audit Statute of Limitations?

Although the IRS generally has a three year statute of limitations for conducting audits, there are some exceptions. The IRS has six years from the date a return is filed to audit a tax return and to assess additional tax if the taxpayer omits income that amounts to more than 25% of income that was reported on the tax return. Another exception allows the IRS to have six years to audit a tax return and assess additional tax on income related to undisclosed foreign bank account reporting or undisclosed foreign income if the taxpayer omits income of more than $5,000. Finally, the statute of limitations on audits and assessing additional tax remains open indefinitely if the taxpayer files a false or fraudulent tax return.

What Can A Tax Attorney Do About The Statute Of Limitations On Audits?

While a tax attorney certainly cannot change the law if you are being audited, an experienced tax attorney can help you navigate your audit in such a way that minimizes the chance that the IRS agent will seek to expand an audit into additional tax years. The statute of limitations placed several layers of restrictions on how far back you can be audited and a revenue agent must have a clear and compelling reason for reaching beyond the three and six year limits. In an audit it is the job of a good tax lawyer to lead the revenue officer, whenever possible, toward the path of least resistance and secure a settlement offer that is in your best financial interest.
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About author
William Hartsock
For over 30 years as a tax attorney William D Hartsock, Esq. "The Tax Lawyer", has provided clients with the most aggressive representation available under the law. Currently, Mr. Hartsock is the Chairman of the San Diego County Bar Association, Pro Se Program and founder of a full service tax law firm comprised of tax specialists located in Del Mar, CA, primarily serving high net worth individuals and mid-size to large corporations.


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