How long can I be audited by the IRS?
Published on February 26, 2024
by Andrew Landin
Andrew Landin, a Tax Lawyer and IRS Enrolled Agent with 20 years of expat tax experience, specializes in US tax preparation, tax planning, and tax advice for US citizens and Green Card holders living and working in Australia.
Table of Contents
How many years back can the IRS audit me?
The Internal Revenue Service (IRS) typically has a three-year window to audit your tax returns. This means they can audit returns filed within the last three years.
However, this period may extend if substantial errors are found or if a return was filed fraudulently. This is why US expats need to maintain accurate records and understand that their tax returns remain open to scrutiny for this duration.
How far back can the IRS audit prior tax returns?
While the standard period for an IRS audit is three years, there are exceptions where they can go further back. If the IRS suspects a significant underreporting of income (more than 25% of your gross income), they can audit up to six years back.
But in cases of fraud or failure to file a tax return, there is no time limit, and the IRS can audit tax returns from any year.
Why am I being selected for an audit?
- Random Selection: Sometimes, returns are chosen randomly for an audit.
- Discrepancies in Reporting: If there are discrepancies between your tax return and the information reported to the IRS by employers, banks, or other third parties, it may trigger an audit.
- Complex or Unusual Transactions: Returns with complex or unusual transactions, especially those involving foreign income and assets, may be more likely to be audited.
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How am I notified of an audit?
The IRS notifies individuals of an audit through a formal letter. This notification will include the details of the audit, such as the tax years under review and the specific items being questioned.
It’s crucial to understand that the initial contact from the IRS is sent through postal mail.
Afterward, the IRS will provide all contact information and instructions in the letter you will receive.
How will the IRS conduct my audit?
The IRS can conduct audits in several ways:
- By Mail (Correspondence Audit): The most common method, especially for simpler issues. You’ll receive a request for additional information about certain aspects of your tax return.
- In an IRS Office (Office Audit): More complex issues may require you to visit an IRS office to discuss your return.
- At Your Home, Business, or Accountant’s Office (Field Audit): The most comprehensive audit type, where an IRS agent will conduct a thorough review of your records and accounts.
What do I need to provide for my audit?
For your audit, you may need to provide:
- Documentation: This includes receipts, bills, legal papers, loan agreements, logs, employment documents, and other records that can substantiate the items of your return that are being audited.
- Explanation of Records: You might also need to explain how you used these documents to prepare your tax return.
- Amendments to Your Tax Return: If errors are found, you may need to file an amended return.
How do I know if the IRS received my response?
To confirm that the IRS has received your response to an audit notice:
- Use Certified Mail: When sending documents, use certified mail with a return receipt. This provides proof that the IRS received your response.
- Follow-up: If you haven’t heard from the IRS within a reasonable time (usually 30 days), follow up with a phone call to ensure they received your information and to inquire about the status of your audit. Usually, you will find the contact number or method within the initial letter the IRS sent you.
What if I need more time to respond to my audit?
If you need more time to respond to an IRS audit, it’s possible to request an extension. This is especially common when gathering the necessary documentation requires additional time.
To request an extension, you should contact the IRS agent handling your case as soon as possible, explaining your situation and specifying how much extra time you need.
The IRS is often willing to accommodate reasonable requests for extensions, particularly if it helps in providing accurate and complete information for the audit.
What are my rights?
As a taxpayer under audit by the IRS, you have specific rights, including:
- The Right to Professional Representation: You have the right to hire a tax professional, such as an attorney, certified public accountant, or enrolled agent, to represent you in your dealings with the IRS.
- The Right to Privacy and Confidentiality: Your tax matters should be handled in a manner that respects your privacy. Any information provided to the IRS should be treated confidentially.
- The Right to Know Why the IRS Is Requesting Information: You have the right to understand why the IRS is asking for information, how it will be used, and what will happen if the requested information is not provided.
- The Right to Appeal Disagreements: If you disagree with the IRS’s findings, you have the right to appeal the decision.
How does the IRS conclude an audit?
An IRS audit can conclude in several ways:
- No Change: If the IRS finds that everything in your tax return was correct, they will issue a “no change” notice, meaning you owe no additional tax.
- Agreed: If the IRS proposes changes and you understand and agree with these changes, you will sign an examination report or a similar form and may have to pay additional tax.
- Disagreed: If you disagree with the IRS findings, you can request a conference with an IRS manager, file an appeal if eligible, or seek mediation.
What happens when I agree with the audit findings?
If you agree with the IRS audit findings, the process is relatively straightforward. You will need to complete any necessary paperwork, which typically includes signing an agreement form provided by the IRS. This form acknowledges your acceptance of the audit results.
Once you agree with the findings, you may need to make additional tax payments if the audit determines that you owe more taxes.
What happens when I disagree with the audit findings?
Disagreeing with the IRS audit findings opens up several options:
- Request a Conference with an IRS Manager: You can request a further review of your case by a higher authority within the IRS.
- File an Appeal: If you still disagree after the conference, you have the right to file an appeal with the IRS Office of Appeals. This is a formal process where you can present your case to an independent IRS appeals officer.
- Seek Mediation or Go to Tax Court: As a last resort, you can opt for mediation or even take your case to tax court if you strongly believe the audit findings are incorrect.
How many years in a row can the IRS audit me?
There is no limit to how many consecutive years the IRS can audit you. However, continuous audits are rare and usually happen only if the IRS finds significant issues with your tax returns in successive years.
Repeated audits can occur if you have a history of tax evasion, substantial errors, or a pattern of questionable tax activities.
Can the IRS audit me two (2) years in a row?
Yes, the IRS can audit you two years in a row.
Continuous audits might occur if the IRS finds significant or recurring issues in your tax returns. However, repeated annual audits are generally rare and usually triggered by substantial errors or suspicious activities noted in your returns.
Can the IRS audit me after three (3) years?
The standard statute of limitations for the IRS to conduct an audit is three years from the date you filed your tax return. However, there are exceptions to this rule.
If you underreported your income by more than 25%, the IRS has up to six years to initiate an audit. In cases of fraud or failure to file a tax return, there is no time limit, and the IRS can audit your return at any time, even after three years.
Can the IRS come after me after 10 years?
Regarding tax collection (as opposed to auditing), the IRS typically has a 10-year window to collect unpaid taxes. This 10-year statute of limitations starts from the date the tax was assessed.
However, certain actions, like filing for bankruptcy or leaving the country, can extend this period. It’s important to be aware that while the IRS may not initiate an audit after 10 years, they can still take action to collect any outstanding taxes within this timeframe.
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