If the Internal Revenue Service (IRS) detects an error or discrepancy on a taxpayer’s tax return, or if the taxpayer fails to file one or more tax returns, the IRS is likely to initiate an audit, or examination of the taxpayer’s records and financial transactions. Depending on the results of the audit and whether the taxpayer appeals, the IRS may impose various penalties, or even refer the matter to prosecutors within the Department of Justice. However, there are certain limitations to the IRS’ auditing powers. For example, a time limit known as the “statute of limitations” restricts the amount of time in which the IRS may initiate an audit after the filing, or due date, of a tax return, though some exceptions apply. With tax returns due April 17 this year, the IRS is poised to launch a wave of audits of taxpayers who make filing errors. Therefore, it is prudent for at-risk taxpayers to understand some basic information about the statute of limitations on IRS audits.
In most cases, the statute of limitations grants the IRS a period of up to three years in which to initiate an audit of a taxpayer. The three-year clock begins counting down from the latter of the following dates:
Though the three-year statute of limitations applies in many cases, there are also a few exceptions which may affect certain taxpayers. In other words, there are some tax situations where the statute of limitations is extended, granting the IRS additional time to audit taxpayers who meet certain criteria. For taxpayers who meet these criteria, the risk of an audit is heightened.
Some major exceptions to the three-year IRS audit statute of limitations are listed below. If any of these exceptions seem applicable to your situation, you should contact an experienced IRS tax audit attorney immediately for further guidance. If you are chosen to be audited, it is essential to begin developing a strategy as soon as possible.
If you are concerned about a tax audit, you may be interested in the following for further reading:
While educating yourself is a useful first step, it is critical to discuss your matter with an experienced tax professional – ideally an attorney with a long record of resolving civil audits and defending criminal cases successfully. At the Tax Law Offices of David W. Klasing, our tax team is comprised of criminal tax defense attorneys, employment tax audit attorneys, foreign account audit attorneys, and other accounting and tax professionals, bringing decades of combined legal and financial experience to a wide range of tax issues facing business entities and individual taxpayers.
Whether a tax audit concerns the inaccurate reporting of income, the division of property in a divorce, capital gains realized from Bitcoin and other cryptocurrencies, or the misclassification of employees as independent contractors by a small business owner, our tax firm is ready to approach the matter with enthusiasm and efficiency. For a reduced-rate tax consultation about how we can assist with your audit-related tax matter, contact the Tax Law Offices of David W. Klasing online, or call us today at (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.
Here is a link to our practice overview video on warning signs that an audit has gone criminal.
What is an effective tax defense in an IRS eggshell tax audit?
So, you cheated on your taxes and you are under a tax audit…
Why should I hire a tax attorney to represent me in a tax audit?
Foreign income and information non-compliance
Read more about Tax Audits in our FAQ library: