Dealing with an IRS audit can be a stressful and intimidating process, especially when you’re unsure of how far back the IRS can look into your tax records. However, understanding how IRS audits work and knowing what triggers an audit can give you peace of mind and help you stay prepared. In this blog post, we’ll answer the most pressing questions about IRS audits, such as how far back the IRS can audit, what happens if you win your audit reconsideration, and what to do if you get audited again.
1. What Is an IRS Audit?
An IRS audit is a review of your tax return and financial information to ensure everything was reported accurately. The IRS audits taxpayers to verify that all income, deductions, and credits were reported properly. Audits can happen through mail (correspondence audits) or in person (field audits). Audits don’t necessarily mean you’ve done something wrong. In some cases, the IRS just needs additional information to complete your return.
2. How Far Back Can the IRS Audit?
In most cases, the IRS can audit your tax returns for up to three years after the filing date. This is known as the “statute of limitations” for an IRS audit. However, there are certain exceptions where the IRS can go back even further.
| Circumstance | Years IRS Can Go Back |
| Standard audit | 3 years |
| Substantial underreporting (25%+) | 6 years |
| No filed return | Unlimited |
| Fraud (intentional tax evasion) | Unlimited |
3. Factors That Extend the Audit Period
Several factors can extend how far back the IRS can audit your tax records:
- Substantial underreporting: If you underreport your income by 25% or more, the IRS can audit up to six years.
- Amended returns: Does amending a return trigger an audit? While filing an amended return doesn’t automatically trigger an audit, it can raise red flags, especially if large amounts are adjusted.
- Fraud: If the IRS suspects fraud or intentional evasion, there’s no statute of limitations. They can audit your records indefinitely.
Always be honest and accurate in your tax filings to avoid extended audit periods and possible penalties.
4. What Happens If You Win Your Audit Reconsideration?
If the IRS disagrees with your tax return after an audit, you can request an audit reconsideration. This gives you a chance to provide additional information or challenge the findings.
What happens if I win my audit reconsideration? If you win, the IRS will adjust your tax return and may refund any overpaid taxes. It’s important to act quickly and provide all necessary documents to support your case.
5. What Happens If You Fail an Audit?
What happens if you fail an audit? If the IRS determines that you owe more taxes after an audit, you may face:
- Additional taxes: The IRS will issue a notice of deficiency, outlining the extra taxes owed.
- Interest and penalties: You’ll be charged interest on the unpaid taxes and may face additional penalties for underreporting.
- Possible future audits: If you get audited once, will you get audited again? It’s possible, especially if you have a history of discrepancies. The IRS may take a closer look at your future returns.
If you fail an audit, you have the right to appeal the decision, but it’s crucial to consult with a tax professional for the best outcome.
6. Common IRS Audit Triggers
Certain actions can increase the chances of being audited. Here are some of the most common IRS audit triggers:
- High income: Taxpayers in higher income brackets are more likely to face audits.
- Unreported income: Failing to report all sources of income can lead to an audit.
- Large deductions: Excessive deductions, especially on Schedule C for self-employed individuals, can raise red flags.
- Amended returns: Does amending a return trigger an audit? It might if the changes are substantial.
- Claiming credits you don’t qualify for: For example, claiming the Earned Income Tax Credit without meeting the requirements can lead to an audit.
By filing accurate and truthful returns, you can avoid these common audit triggers.
7. Testimonial: Our Client from Nevada
“I’ve been a client of Etiquette Service Group for over five years, and I couldn’t be happier with the service I’ve received. As a small business owner in Nevada, I faced a Schedule C audit last year. I was nervous, but thanks to their expertise, we successfully navigated the audit without any issues. They also helped me amend a return without triggering an audit. Their knowledge and professionalism have given me peace of mind every tax season.” – Sarah L., Nevada
8. Contact Us for Hassle-Free Accounting Services
If you’re worried about an IRS audit or need help managing your taxes, our accounting and bookkeeping services can help. We provide:
- Audit support: We’ll help you handle any IRS audits with ease.
- Tax preparation: Ensure your returns are accurate, reducing the risk of being audited.
- Amended returns: We can assist with filing amended returns and minimizing audit risks.
Don’t wait until you’re facing an audit. Contact us today for professional accounting services.
Conclusion
The IRS can audit your tax returns for up to three years in most cases, but certain factors can extend this period. Whether it’s substantial underreporting, fraud, or unfiled returns, it’s important to know how long the IRS can review your tax history.
By keeping accurate records and filing your taxes correctly, you can avoid the stress and financial burden of an audit. If you do find yourself in an audit, remember that you have the right to appeal and request reconsideration.
For expert guidance on audits, tax filings, or bookkeeping services, contact us today. Our experienced team is ready to help you navigate the complexities of IRS audits.