How far back can the IRS go when they conduct an audit?

On Behalf of | Nov 25, 2019 | Criminal Tax Issues, Tax Audits

A federal tax audit can involve a thorough review of one’s tax filings. The exact period of time the Internal Revenue Service (IRS) can “look back” through tax records is generally three years. But, like everything with taxes, the answer is not always as clear as we think. In fact, in some cases the agency can extend this look back period even further than the general three-year rule.

Factors that can result in an extended look back period often include:

  • Omission of income. The IRS may double the amount of time it can look back through tax records if the agency can establish the taxpayer omitted more than 25% of their income. This results in a six year look back period.
  • Failure to report foreign income. The agency also gets an extension if the taxpayer failed to report over $5,000 in foreign assets. This extension is also generally set at six years.
  • Failure to file. Taxpayers who forget to file or make a misstatement on their returns can also be subject to a longer look back period. If the IRS can establish the taxpayer did not file or made a fraudulent filing, the agency can go back through tax obligations indefinitely.

Taxpayers can reduce the risk of extended look back periods by filing tax returns carefully. The IRS pays close attention to certain key issues, like properly reporting foreign assets. If you are unsure of how to do this, get professional advice.

It is also wise to seek legal counsel if contacted by the IRS of an impending audit. The attorneys at Goldburd McCone are familiar with the agency’s tactics during these audits and can help to better ensure your interests are protected.