Did you know that in Fiscal Year 2023, the IRS closed 582,944 tax audits, leading to $31.9 billion in recommended additional tax? That’s a clear reminder that IRS audits are a real possibility for individuals and businesses alike. But how far back can the IRS audit your taxes?
The answer isn't always simple. While the IRS typically audits tax returns from the past three years, certain red flags—like substantial underreporting of income—can extend that period up to six years or more.
In this article, explore the IRS audit statute of limitations, tax audit timelines, and how you can protect yourself from potential tax troubles in 2025.
How Far Back Can the IRS Audit Your Tax Returns?
The Internal Revenue Service (IRS) follows strict tax statute of limitations when conducting audits, but certain tax issues can allow the IRS to extend the statute of limitations beyond the standard timeframe. If you’re worried about an IRS audit, understanding how many years to audit your tax returns will help you avoid tax problems and prepare accordingly.
What Is the Standard IRS Audit Period?
The IRS statute of limitations generally gives the IRS three years to conduct an audit after a tax return was filed. The audit clock starts based on:
- The original due date of the return, OR
- The date the return was actually filed (whichever is later).
This means if you filed on April 15, 2022, for the 2021 tax year, the IRS has until April 15, 2025, to initiate an audit. If you filed late for the IRS (e.g., in October 2022 due to an extension), the three-year period would start from that later date.
When Can the IRS Audit Beyond Three Years?
While the IRS tries to audit within three years, certain situations allow them to extend the statute of limitations:
- Six Years to Audit for Substantial Underreporting
- If you omit 25% or more of your income tax, the IRS can audit up to six years back.
- This often applies to cash-based businesses and unreported 1099 income.
- No Time Limit if You Commit Tax Fraud or Fail to File
- If you never filed a tax return, the IRS can audit indefinitely—the statute of limitations never starts.
- If you file a fraudulent tax return, the IRS may argue that the entire tax return remains open for audit.
- Foreign Income and Offshore Accounts (No Expiration)
- If you fail to report foreign assets (over $5,000 in offshore accounts), the IRS can review returns filed within the last decade or even longer.
If you’re dealing with potential IRS audit risks, consult a tax lawyer to ensure compliance and avoid extended audits.
Further Reading: What should you do if you get an IRS audit letter?
What Triggers an IRS Audit?
The IRS conducts audits based on specific tax year red flags. While some audits are random, certain tax issues increase the likelihood of being audited by the IRS.
Common IRS Audit Red Flags
- High-Income Taxpayers
- The more you earn, the higher your audit risk.
- Taxpayers earning over $500,000 per year are 5x more likely to be audited than those earning less.
- Large Business Deductions
- If you’re self-employed and deduct a significant portion of your income, the IRS may request a face-to-face audit.
- Excessive deductions related to travel, meals, entertainment, or home office expenses are common triggers for an audit.
- Unreported Income
- The IRS gets copies of W-2s, 1099s, and other financial records. If the numbers don’t match, they will investigate.
- Errors on a Tax Return
- Even small mistakes—like incorrect Social Security numbers or misreported income—can flag your return for further review.
- Claiming a Home Office Deduction
- The IRS closely scrutinizes this deduction to ensure the space is exclusively used for business.
To avoid an audit, ensure all items on your tax return are accurate, properly documented, and consistent with IRS standards.
What Happens During an IRS Audit?
An IRS audit can be conducted by mail or in person. Knowing the process helps you prepare if you ever get that dreaded letter.
How Will the IRS Notify You of an Audit?
The IRS will provide all contact through mail only. You will receive:
- An official IRS audit letter (such as CP75 or CP2000) explaining the audit results.
- Instructions on whether the IRS requires more information or is proposing adjustments to your return.
The IRS cannot audit you by phone, email, or text. Any such messages are scams.
What Do You Need to Provide in an Audit?
The IRS may request documentation related to your return, including:
- Tax returns from the audited years
- Income tax records (W-2s, 1099s, K-1s)
- Business records (receipts, invoices, mileage logs)
- Proof of deductions (charitable donations, mortgage interest)
- Bank statements and investment records
If you can’t find a document, request copies from your employer, bank, or tax preparer before the deadline.
Further Reading: Learn expert tips and guidance on understanding IRS tax audits
Can the IRS Extend the Audit Statute of Limitations?
Sometimes, the IRS may request to extend the statute of limitations for assessment.
Should You Agree to an Extension?
You can refuse, but this may push the IRS to finalize an unfavorable tax assessment.
If you agree to extend the statute, you gain more time to:
- Gather missing documentation
- Dispute incorrect audit findings
- Negotiate a tax settlement
A conference with an IRS manager may help resolve disputes before heading to tax court.
When Does the IRS Statute of Limitations Expire?
- The IRS statute of limitations is three years in an audit for most returns.
- After the statute expiration date, the IRS cannot assess additional tax unless fraud is involved.
If the IRS could argue that there were errors on a tax return, it may try to extend the statute. Know your rights before signing any IRS extension form.
Key Takeaways
- The IRS to audit your filed tax returns is generally limited to three years from the date of filing, but tax evasion or certain tax issues can remove the time limit the IRS has.
- The statute of limitations for audits is typically three to six years, but the IRS or FTB can extend the period of limitations in cases of fraud or underreported income.
- The IRS can conduct different types of audits, including an audit by mail or an in-person audit, depending on the complexity of your tax return such as income and deductions.
- If you agree with the audit results, you may need to pay additional federal tax, but if you disagree, you can challenge it through the Franchise Tax Board (FTB) or tax court.
- The IRS may request an extension of the statute by extending the tax assessment period, but you are not required to agree unless it benefits your case.
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