What is the Statute of Limitations on a Tax Audit?
You must have heard the saying that goes: the only inevitable things in life are death and taxes. The payment of taxes is no one’s favorite thing to do but it is almost unavoidable.
You are obligated to give a portion of your income to the federal government, this is known as a tax payment. Understanding how taxes work is a pertinent part of knowing how to handle tax situations.
You have recently received an audit notice from the IRS and you have never been audited before. You may become scared and start asking tons of questions. This is expected. IRS audits are not always bad news but they can be.
The IRS conducts audits at their discretion when they suspect foul play or if they have any questions regarding a person’s tax records or a business’s financial documents. If you or our company is getting audited by the IRS, we have all the answers you need. Call us today at 888-585-8629 or 617-430-4674 with any questions you have about taxes. Trying to handle your base by yourself is never a good decision; you definitely need the services of a tax professional.
The moment you get a notification about an audit, you should seek professional help. IRS audits are not exactly bad news but can be if they are not handled well. Unless you have notable experience and skill in dealing with the IRS and tax audits, you may not know how to handle the process properly. The way you present your documents and information to the IRS can either make them leave you alone or pursue you further; it is capable of making them broaden their audit and consume more or your time.
In this article, we will be answering one common question many taxpayers ask, and this question is: what is the statute of limitations on a tax audit?
What is a Statute of Limitations?
A statute of limitations is simply a period of time after which a creditor is no longer legally allowed to come after a debtor concerning a debt (or in this case, the duration of time after which the IRS is not allowed to take legal actions after an audit). Essentially, we’re going to be telling you how far back the IRS can audit you.
Statute of Limitations on a Tax Audit
The IRS can audit individual, corporate, and partnership returns when they deem it necessary. Generally, when an income tax audit is being carried out on an individual, the statute of limitations is 3 years from the due date of the income tax return.
However, in certain exceptional cases, the 3 years statute of limitations on a tax audit can be extended to 6 years if you understate your income by up to 25 percent or if you have a foreign bank account and under-report at least $5000 in income from that foreign bank account. These complications can make the statute of limitations increase to 6 years.
In the event that you get into civil fraud, there is no statute of limitations on the tax audit. The IRS is allowed to broaden their audit and go as far back as possible.
If the IRS is auditing you beyond the normal 3 years window, you are facing a serious audit and you should strongly consider getting an attorney immediately to ensure you are well represented and prepared to face the IRS heads on.
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