How Long Can the IRS Audit You?

Posted on by Tax Partners
31
Jan

How Many Years Back Can the IRS Audit You?

The Internal Revenue Service (IRS) generally has a three-year window to audit your tax returns. This means that after filing, your tax returns remain open to IRS review for up to three years under normal circumstances.

However, this period can extend significantly in cases where the IRS identifies substantial errors or tax fraud. This is particularly important for US expats and business owners, as their international tax filings may be subject to additional scrutiny.

 

How Far Back Can the IRS Audit Prior Tax Returns?

While the three-year audit period is standard, the IRS can extend this period under certain conditions:

  • Six-Year Audit Window: If the IRS finds that you underreported your income by more than 25%, they can audit returns filed up to six years ago.
  • Unlimited Audit Window: If you never filed a tax return or the IRS suspects tax fraud or willful evasion, they can audit your entire filing history with no time limit.

Given these rules, keeping records for at least six years is highly recommended, and in cases where fraud or non-filing may be suspected, keeping records indefinitely can be beneficial.

 

Why Does the IRS Audit Taxpayers?

The IRS selects taxpayers for audits based on several factors, including:

  • Random Selection – Some tax returns are chosen randomly through automated processes.
  • Discrepancies in Reporting – If your reported income, deductions, or credits don’t match IRS records from employers, banks, or third-party institutions.
  • Foreign Income and Assets – US expats and taxpayers with offshore accounts may be more likely to face audits due to stricter international tax laws.
  • Unusual Tax Deductions or Claims – High deductions, large charitable donations, or home office expenses can trigger IRS scrutiny.
  • Past Issues – If you've been audited before and mistakes were found, the IRS might take a closer look at future returns.

Understanding these triggers can help you avoid common pitfalls that could lead to an audit.

 

How Does the IRS Notify You of an Audit?

The IRS only notifies taxpayers by mail. If you receive an email, phone call, or text claiming to be from the IRS about an audit, it is a scam.

Your audit notice will include:

  • The tax years under review.
  • The specific items being questioned.
  • Instructions on how to respond and what documents to provide.

 

Types of IRS Audits

The IRS can conduct audits in three ways:

  1. Correspondence Audit (By Mail)
    • The most common type of audit.
    • The IRS requests specific documentation related to certain aspects of your return.
    • Typically resolved with mail correspondence.
  2. Office Audit (In-Person)
    • You visit an IRS office for a detailed discussion.
    • More complex issues are reviewed, requiring extensive documentation.
  3. Field Audit (Home or Business Visit)
    • Most comprehensive type of audit.
    • An IRS agent visits your home, business, or accountant’s office for an in-depth review.
    • Common for business owners, high-income individuals, and expats with foreign income.

 

What Documents Do You Need for an IRS Audit?

The IRS may request the following during an audit:

  • Tax returns and W-2s/1099s for the audited years.
  • Receipts and invoices for deductions or expenses claimed.
  • Bank and investment statements.
  • Business records, if applicable.
  • Foreign asset documentation (for expats or offshore accounts).

Ensuring accurate and well-organized records will make the audit process smoother.

How to Confirm the IRS Received Your Response

 

  • Send documents using Certified Mail with a return receipt.
  • Follow up after 30 days if you haven't received a response.
  • Use the contact number listed in your IRS audit letter for inquiries.

 

Can You Request an Extension to Respond to an IRS Audit?

Yes, if you need more time to gather documents, you can request an extension by contacting the IRS agent assigned to your case. In most cases, the IRS will grant reasonable extensions.

 

Your Rights During an IRS Audit

Taxpayers undergoing an audit have the following rights:

  1. Right to Professional Representation – You can hire a tax professional (CPA, EA, or tax attorney).
  2. Right to Privacy and Confidentiality – The IRS must handle your case fairly and confidentially.
  3. Right to Know Why the IRS is Requesting Information – The IRS must provide clear explanations.
  4. Right to Appeal – If you disagree with the audit results, you have the right to appeal.

 

How Does the IRS Conclude an Audit?

An audit can end in one of three ways:

  1. No Change – The IRS accepts your return as filed, and no additional tax is owed.
  2. Agreed Changes – If you accept the IRS’s adjustments, you’ll sign an agreement and pay any additional taxes owed.
  3. Disagreed Changes – If you disagree with the IRS’s findings, you can request a conference, file an appeal, or go to Tax Court.

 

What If You Agree with the IRS Audit Findings?

If you agree with the IRS findings:

  • You’ll sign the agreement.
  • If you owe additional taxes, you’ll need to pay or set up a payment plan.

 

What If You Disagree with the IRS Audit Findings?

If you disagree with the audit results, you have options:

  1. Request an IRS Manager Review – You can ask for a higher-level IRS review.
  2. File an Appeal – The IRS Office of Appeals offers an independent review process.
  3. Seek Mediation – If disagreements persist, mediation might resolve issues.
  4. Go to Tax Court – As a last resort, you can challenge the IRS in Tax Court.

 

How Many Years in a Row Can the IRS Audit You?

  • The IRS can audit you multiple years in a row.
  • If consistent issues or red flags appear, repeated audits may occur.
  • However, back-to-back audits are rare unless there’s a pattern of errors or suspicious activity.

 

Can the IRS Audit You After Three Years?

Yes, the IRS can audit beyond three years under certain circumstances:

  • If you underreport income by more than 25% → IRS can audit up to six years.
  • If you committed fraud or didn’t file a return → No time limit.

 

Can the IRS Come After You After 10 Years?

The IRS has 10 years to collect unpaid taxes. This is called the statute of limitations on collections.

However:

  • If you filed fraudulent returns or didn’t file at all, the IRS can audit at any time.
  • Certain actions, like leaving the country or filing for bankruptcy, can extend the 10-year collection period.

 

Final Thoughts

Understanding the IRS audit process and how far back the IRS can review your returns is essential for compliance and financial security.

  • The standard audit period is three years.
  • Six years if you underreport income by more than 25%.
  • No time limit if fraud or non-filing is suspected.
  • The IRS can audit multiple years in a row, though it's uncommon.

To avoid issues:

  • File accurate tax returns.
  • Maintain organized records for at least six years.
  • Seek professional help if audited.

If you need assistance navigating an IRS audit, Tax Partners is here to help. We specialize in US taxation, audits, and international tax compliance.

This article is written for educational purposes.

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at info@taxpartners.ca, or by visiting our website at www.taxpartners.ca.

Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.