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It’s a common misconception that the IRS has the power to audit anything or anyone at any time. By law, the IRS audit statute of limitations expires after three years. However, certain important exceptions you should know about can extend that audit window indefinitely.
IRS audit statute of limitations: the exceptions
There are many myths about IRS audits. A guaranteed fact is that the IRS audit statute of limitations is waived if a person has never filed a tax return at all.
The standard three years can be doubled to six years for people who omit more than 25 percent of their income on tax returns. Another reason three years becomes six years is if $5,000 of foreign income has been omitted.
When there is no limit
There are also many reasons why the IRS is entitled to no statute of limitations at all.
If taxpayer fraud is involved, there is never an IRS audit statute of limitations. Even though the government does not take fraud lightly, the IRS has a high burden of proof to assert a taxpayer has committed fraud. The IRS contacts taxpayers directly by either phone or mail but never email.
Amend a return
If there is a mistake or omission, a tax return may be amended for three years after it is filed. If filed within that window, the IRS will quickly make any adjustments to a return that is necessary.
Selection process
Taxpayers might need auditing services when their return is selected for an audit based upon a comparison of norms for other similar returns. Selected returns are reviewed by an experienced IRS auditor. Some IRS audits are conducted entirely by mail, while other audits are completed at a local IRS office or a taxpayer’s place of business.
At DeFreitas & Minsky, we specialize in all aspects of tax returns on Long Island. If you have questions about the IRS statute of limitations or would like any other assistance, please call DeFreitas & Minsky Certified Public Accountants at 516.746.6322.
