All About IRS Audit Regulations

IRS Audit statute of limitations

            What is the IRS audit statue of limitations

Citizens who are considered as a high risk for underpaying their respective taxes are monitored using a computer software program by the IRS or the Internal Revenue System. This software can tell who is paying their tax properly and who is not. Read on to find out more about the IRS audit regulations.

Audit selection:

Filing an amended return merely will not start an audit investigation. However, filing this will subject these returns to an initial audit screening process and the amended returns may be selected for IRS audit. The IRS employs the ‘National Research Program’ to filter all tax payer returns initially and the returns are then selected. Based upon the IRS’s specific criteria to decide which returns may result in adjustment upon an audit, this program selects returns for audit using a baseline return.

The computer selected taxpayer’s returns are initially assessed by an IRS auditor. It is up to the auditor to decide if the return can be accepted as it is or if it has to be investigated further by audit examiners. A final decision regarding whether the return can be passed on for acceptance or if it requires a follow-up is in the hands of the audit examiner.

IRS audit location:

Audits can be performed in person anywhere that you keep your tax records from your place of business, a local office or even your place of residence or it can even be conducted by mail. The IRS will inform you in case it requires any additional tax information such as a receipt evidencing payment of expenses or proof of income. If the audit is conducted in your office, then it will occur where you maintain your accounting books.

Record Retention requirements:

As a general rule, the tax records should be maintained during the entire period of the business transaction with the addition of another extra three years. As per IRC recommendations, taxpayers are required to maintain payroll records for a minimum of six years at least. During an audit, IRS has the authority to evaluate tax returns for the previous three years. However, if substantial mistakes are found, the IRS can extend this review period. But in no case will it include tax returns more than six tax years old.

IRS audit statute of limitations:

IRS auditor

                          Conducting an IRS audit

The IRS audit rules also include provisions for statute of limitations. The IRS may request the tax payers to allow extra time for the purpose of statute of limitations. The IRS also conforms to refund deadlines. If you have reasons to believe that the statute of limitations applicable has been surpassed in favor of IRS, then your accountant or tax attorney should thoroughly review the ‘Publication 1035, Extending the Tax Assessment Period.’

That was some information regarding IRS audit selection, location and the IRS audit statute of limitations. For more information on this topic, consult your accountant or your tax attorney.