100+ Years of Combined Tax Resolution Experience.
Many Americans are concerned about having the IRS audit their income tax returns. Of course, filing your tax return on time doesn’t mean that you are safe from an IRS audit or from the IRS coming after you. In fact, the IRS can look into your return long after you filed it.
While it’s important to get your return in by the federal due date, the truth is that no taxpayer in the United States is completely immune from an IRS audit — regardless of whether you’re randomly selected for an audit or have more serious tax issues, such as making mistakes on a tax return (or worse).
If your tax return does raise red flags with the IRS, you might be subject to an audit. Every taxpayer must report all of their taxable income, as well as pay the taxes that come with it. If you purposely fail to do so, you can be fined or even face jail time.
Fortunately, understanding how and when the IRS can audit you can help you be better prepared should this situation arise.
Can the IRS audit you after five years? What about 10 years? Usually, there is a time limit on how long the IRS has to collect back taxes you owe. The federal statute of limitations usually runs for three years — however, the IRS can request an extension on this period. When the statute of limitations expires, the IRS can no longer run the audit. You can decline to extend the audit, in which case the agent will have to make a decision based on their current findings. However, these audit periods can be extended by up to six years or even to no time limit at all.
If the IRS decides to audit you, it will typically do so over two years. The length of the audit depends on the following:
If you choose to contest the IRS agent’s findings, it’s wise to have legal counsel from a tax lawyer who will assist you in the dispute process. If you need a tax lawyer specializing in IRS audits and defense, contact our experienced and trusted team of tax lawyers.
Based on the federal statute of limitations, the IRS can conduct an audit typically up to three years after filing your tax return. This statute of limitations means that if, for example, you filed your federal tax return on the federal due date of April 15, the IRS can audit this return until April 15, three years later.
There are a few points to keep in mind about due dates:
While the IRS usually only has up to three years to collect back taxes owed, there are some exceptions. In these cases, the IRS can conduct a tax audit up to six years after the filing date — or longer if you never filed or are subject to civil tax fraud, examination or investigation.
Reaching out to a tax attorney at Polston Tax and having us handle your tax audit can simplify the process for you and ensure the correct handling of every step.
Extending the statute occurs in some cases. The reasons for extending an audit aren’t always for fraud. Sometimes, it’s because of unreported income. The IRS has up to six years to conduct an audit on back taxes that you owe in the following circumstances:
For example, you sell your house for $6.5 million and claim that you originally invested half of that amount, $3.25 million, in the property. You only invested $2 million in that property (your basis). Your basis overstatement results in you only paying taxes on $3.25 million of profit gain when you should have paid taxes on $4.5 million.
Additionally, the IRS has a number of forms you need to fill out related to foreign income, gifts, assets and inheritances. The IRS will extend the statute if you don’t fill them out.
Request a free consultation with a dedicated tax attorney who can help you avoid an audit or navigate the process when you face one.
Having the statute of limitations extended on your tax return by an additional three years is far from ideal, but there is an even worse situation that you can be in.
In very exceptional circumstances, there will be no tax audit time limit on how far back the IRS can collect back taxes owed – meaning that the statute of limitations will not be applicable. This is a situation every taxpayer wants to avoid at all costs.
In the following circumstances, no statute of limitations may apply:
Filing a fraudulent tax return is a serious felony violation. A taxpayer who files a fraudulent tax return can be imprisoned for up to three years, fined up to $100,000 – or both.
After assessing your tax liability, the IRS has 10 years to collect. This is known as the Collection Statute Expiration Date (CSED).
There have been cases where the collection statute has been renewed for well beyond 10 years, so it is important that you keep the following items on hand:
Proper record-keeping can help you resolve your IRS dispute and reach a better outcome for your case. When you reach out to us at Polston Tax, we can offer you the tax audit representation you need.
In most cases, an IRS audit is random. Some people, such as those who are self-employed or have prior liabilities, are more susceptible to continuous audits than others. Yes, the IRS can audit you for several years in a row. However, if they have audited you on the same issue and you have won the dispute, they will be limited to how many times they can audit you.
Several factors can trigger the IRS to conduct an audit on your tax returns:
The IRS will typically carry out an audit in person as an interview or via mail.
If the interview is in person, the IRS will first contact you via mail with contact information and instructions. Afterward, they will set up an interview with you at a local IRS office, your home, your place of business or your accountant’s office. In the event of an interview, it’s wise always to have counsel with you.
If your audit is via mail, the IRS will request additional information regarding items on your tax return. These items may be income, expenses or deductions. If there are too many records to mail, you can request to conduct the audit in person.
During your audit, the IRS agent may ask you to provide a list of various records, including recipes, bills and legal papers. As technology has become increasingly common, they will also accept electronic documents produced by some tax software. As a self-employed taxpayer, the law requires that you keep all the records you use to prepare your tax return for at least three years.
If the IRS notifies you of an audit, your first step should be reaching out to a tax attorney. An experienced tax attorney can help you prepare for this intense inspection of your tax documentation and answer questions the auditor may have. When you hire a tax attorney from Polston Tax, you can expect the following benefits.
Though you may be tempted to hire a CPA or accountant to help you prepare for an audit, these professionals may not know how to defend clients in a tax audit situation. On the other hand, a tax attorney has the knowledge and experience needed to prepare for and navigate an audit, along with the ability to defend you and negotiate on your behalf.
When you have a tax attorney, you’ll have a partner who can interpret tax law in your best interest, protecting your assets.
An audit can be overwhelming, especially with the terminology and procedures that the IRS uses. If you receive a letter from the IRS, you may need clarification, which is common. A tax attorney can clearly explain the steps in the audit procedure and what the IRS agent will need from you.
As tax attorneys, we are also skilled at picking up when the IRS digs deeper into your tax return to look for criminal intent. Using our discernment, we can advise you accordingly.
When you’re facing an audit, your risk of the IRS finding errors in your tax return increases. If this occurs, the IRS could subject you to hefty interest and penalties. In extreme cases, you may need to pay tens of thousands of dollars – you may even face jail time.
On top of additional interest, the penalties you may face include:
Your tax attorney can negotiate on your behalf to reduce the liability during the process — you don’t have to wait until the IRS has made its decision to begin defending your case. At Polston Tax, we review the options available during the audit and advise you accordingly.
Being audited by the IRS can be scary, especially if you don’t know tax law. You deserve to have your tax rights protected. Speak with a Polston Tax attorney who will provide tax advice and protect you from potentially having thousands of additional tax dollars added to your tax liability. When you partner with Polston Tax, you will be fully supported by a seasoned tax professional with years of tax industry experience.
Licensed to practice in all 50 states as tax attorneys, we have more than 100 tax professionals on staff from all areas of the tax industry, including:
So we are more than well-equipped to handle your tax matters and provide you with the help you need, all under one roof. Contact us today to get your life back in order and resolve your tax problems for good.
The IRS conducts audits to verify income and expenses claimed on tax returns. For 2020, the IRS audited 509,917 tax returns, which resulted in recommended additional tax of more than $12.9 billion. While your chances of getting audited are low, it is still possible to get selected by the IRS. Sometimes you may be audited simply for having a complicated...
Many Americans are concerned about having the IRS audit their income tax returns. Of course, filing your tax return on time doesn’t mean that you are safe from an IRS audit or from the IRS coming after you. In fact, the IRS can look into your return long after you filed it. While it’s important to get your return in by...
Tax season can be stressful and overwhelming for everyone. Aside from filling out forms, collecting your receipts from the past year and ensuring you’re doing everything correctly, many people fear that they will do something wrong and get audited by the IRS. There is nothing worse than getting all your tax documents together, filing your...
Each year, the IRS processes around 261 million tax returns. From individuals, 90% of these are filed electronically. The IRS expects individuals to file an annual tax return each year. Yet, many don’t file yearly or even haven’t filed for several years. In fact, in 2020, the IRS estimates it was owed over $114 billion in back taxes, penalties,...
Tax Audits are one of the most terrifying things a taxpayer can endure. Most taxpayers don’t know what being audited by the IRS entails and usually don’t know what to do if they are audited. IRS audits can be confusing to most taxpayers as most don’t know what the IRS is looking for when they...