Statute of limitations for tax audit

The Internal Revenue Service (IRS), which is a government agency, is responsible for tax collection and tax law enforcement in the United States. They conduct reviews called the IRS audits on the financial information provided by organizations and individuals. This is to ensure that the information they provide is reported correctly as per the tax laws and the tax amount is accurate. The IRS has the authority to look into the history of accounts too if required.

IRS Audit statute of limitations

The statute of limitations for an IRS audit depends upon the circumstances of tax return. How far they go back and audit really depends upon this factor. Usually, the IRS won’t go back more than three years to audit unless they find something really wrong with the numbers. The statute of limitations begins from the original due date of tax return or the date of filing the federal tax return, whichever is later. As a general rule, the IRS has three years to audit your tax return, three years to process refund of tax and ten years to collect taxes which are due. When considered from the government’s perspective, the statute of limitations places restrictions on the taxpayer’s right to claim a refund of tax. And from the taxpayer’s perspective, this restricts the IRS from collecting any deficit taxes that were originally paid.

Exceptions to the statute of limitations

An amended tax return does not extend the audit period in majority of the cases because it is something that you may have filed at a later stage as a correction to the original tax return. However, there can be exceptions to this. One such exception to the IRS audit statute of limitations is filing an amended tax return during the last 60 days of the open period. Another exception is when you fail to report a tax return of 25 percent or more on your total gross income. In such cases, the statute of limitations for tax audit extends to six years from the due date or the date of filing the tax return, whichever comes later. Tax fraud or tax evasion too can extend the audit period to six years as it is considered legal offenses.

                  Statute of limitations – exceptions

Sometimes the IRS may not be able to complete the audit before the statute of limitations expires. In such cases, the IRS can request an extension to perform the audit, but only with the consent of the taxpayer. The consent agreement may or may not specify the date on which the audit has to be completed. However, the taxpayer has the right whether to agree to the extension or not.