How Long Does the IRS Have to Conduct an Audit?

Many taxpayers worry greatly about the risk of facing a tax audit. And, a lot of them breathe a sigh of relief once their taxes are filed and they don’t immediately receive correspondence from the IRS.

Unfortunately, though, these individuals may be ceasing their worries prematurely. The IRS typically has up to three years after a return is filed to decide it wants to audit it.  

How Are Those Three Years Calculated?  

So, you may be wondering, how does the IRS calculate the three-year audit window? Typically, it’s based on the day that your taxes were originally due. Thus, if you file late without a formal extension, you don’t get to just count based on the day you filed. With a formal extension, on the other hand, the audit deadline does move to your approved, extended filing date unless you file before that date. In that case, your audit deadline is based on the day you actually filed.  

Omissions of Income  

If three years, as calculated by the IRS, have passed since you filed a tax return you’re worried about, you may be breathing a little easier. But, don’t breathe too easy just yet!If you omitted income on the return in question and if that income is more than 25% of what you reported, the IRS has longer to audit you. In these instances, it doubles its deadline to a full six years.  

Undisclosed Foreign Assets  

The extended, six-year deadline also applies to tax years in which the taxpayer failed to report foreign financial assets of over $5000.  

Fraudulent Returns  

Finally, if you filed a return that was fraudulent, according to the IRS, there is no statute of limitations on how long it has to conduct an audit.   And, since the IRS gets to determine what constitutes a “fraudulent” return or not, you are basically never in the clear if you’ve been dishonest on a return. 

The Bottom Line  

The IRS holds a lot of power and jurisdiction when it comes to audits. So, even if you think you might be “safe,” you can never fully know for sure. That’s why it’s best to file all returns correctly and thoroughly, ideally with the help of a professional, and also to have a tax expert on your side who can assist you if the IRS does decide that you’re due for an audit.