How Far Back Can the IRS Audit You?

Oct 16, 2019

picture of the word AUDIT on a tablet to accompany an article about IRS audit limitationsThe mere mention of the word “audit” gives most taxpayers the chills. So let’s talk about how long the IRS can audit you, plus a few tips to prevent tax audits.

How Long Is the IRS Audit Window?

How far back can the IRS audit you? In most cases, the answer is 3 years from the missed filing year. However, there are exceptions that can increase the IRS audit window.

  • Not Filing: If you don’t file tax returns, the IRS can audit you any time in the future—10, 20, or 40 years from the missed filing year.
  • Omissions: Failing to report more than 25% of your income increases the audit window to 6 years. Forgetting to submit forms—including 5471 (CFC stockholders), 3520 (gifts or foreign inheritance), and 8938 (overseas assets reporting)—also tacks on years.
  • Unreported Foreign Income: Did you forget to include $5,000 or more in foreign income on your U.S. tax return? This mistake can increase the IRS’ audit statute of limitations to 6 years. If you don’t report foreign income at all, the IRS can audit you at any time.

Overstating vs. Omitting

Another tactic that ensnares taxpayers is “overstating.”

Let’s say you bought a property for $500,000, but claim on your tax return that you paid $1.5 million. A few years later, you sell the property for $3 million and pay taxes on the $1.5 million gain. However, you should have paid taxes on a $2.5 million profit.

This discrepancy is known as “overstating.” It’s not the same as omitting income, but engaging in the practice can also tack another 3 years onto your audit window.

How Long Can the IRS Hound You for Past Due Amounts?

Typically, the Internal Revenue Service has 10 years to collect or take action regarding past tax debts.

Tips for Keeping IRS Audits at Bay

The best way to survive a tax audit is to avoid it altogether. How?

  • File taxes on time or formally file for extensions;
  • Report all income and disclose every cent;
  • Enlist a professional to prepare your returns;
  • Comply with FBAR requirements (if you have $10,000 or more in overseas accounts);
  • Be careful with tax shelters and listed transactions; and
  • Don’t forget to sign your return!

Connect with a Tax Audit Defense Attorney

Is the IRS breathing down your neck? Have federal or state authorities targeted you for an audit? No problem; we’re here to make it better. Our team of tax law attorneys has carried countless individuals and businesses through IRS audits. We lift the burden from your shoulders and secure the best possible outcome for you.

Get in touch with our experienced attorneys today. Learn why clients rate us 10 out of 10, and Super Lawyers has awarded our firm top honors for several years running.

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