How Far Back Can the IRS Audit Your Tax Returns?

Generally, the IRS has three years to audit your tax returns. However, there are exceptions that extend the statute of limitations to six years or even longer. How long the IRS has to conduct an audit depends on various facts and circumstances. As a result, even if many years have passed since you failed to file a tax return or pay your taxes, don’t assume you are off the hook. You should still consult a tax attorney about whether you could be liable for those taxes.

When Does the Three-Year Statute of Limitations for Audits Apply?

In most cases, there is a three-year statute of limitations on audits and that period starts to run on the original due date of the return or the date of filing, whichever is later. For example, if your tax return was due on April 15^th and you filed on or before that date, you can be audited up to three years after April 15th. However, if it was due in April but you filed in September, the IRS has three years from that September date.

Importantly, if you never filed a tax return, the statute of limitations does not start running so you could be liable for those unpaid taxes even 20 years later.

Can the IRS Audit You After Three Years?

There are several instances where the IRS has additional time to audit your tax return. One of the most common situations is when the agency identifies a substantial error in the return. Typically, this means the taxpayer has understated his or her gross income by more than 25%. The IRS may go back six years in this event.

The IRS can audit you even further back in some circumstances. In fact, there is no statute of limitations at all in cases involving false or fraudulent returns, willful attempts to evade tax, or if no tax return has been filed.

In addition, the IRS can ask you to agree to an extension of the statute of limitations. You are not required to agree to this, but if you don’t, then the IRS will render a decision about what you owe based on the information it has at that time, which may not be favorable to you.

Note that there is a separate statute of limitations for the IRS to collect the taxes you owe, which is ten years from the date the tax was assessed. Therefore, if the IRS determined you owed money but it hasn’t attempted to collect yet, don’t think you got away free. It has ten years. This period can be further tolled (or extended) if you file for bankruptcy, you submitted an Offer in Compromise which is still pending, or you requested a Collection Due Process Hearing.

What Should You Do If You Have Not Filed a Tax Return or Paid All Your Taxes?

The IRS may not catch your mistake. It only has resources to audit a certain number of returns every year and you may get lucky. However, do you want to rely on luck? The IRS can go back many years to audit you depending on your circumstances. If you never filed, then you have no protection from an audit. The better path is to consult an experienced tax attorney to determine what steps to take. Coming forward may save you significant money in penalties and interest and help you avoid seizure of your assets and possible criminal action.