Nationwide Tax Assistance with Proven Results
Length Of Time You Are Subject To An IRS Audit

Length Of Time You Are Subject To An IRS Audit

One of the biggest fears of all taxpayers, whether individual or corporate, is being subject to an IRS audit. Even though you may not be engaged in any illegal activity, the time and resources required to successfully endure an audit can often be stress provoking enough.

While remaining organized and detailed in financial reporting is always recommended, you should also stay aware of changes within IRS regulations that may affect you. This can be difficult to understand all on your own, so a qualified tax attorney can be a great way to make sure you never have undue stress from an unexpected audit.

There have been recent changes related to the length of time the IRS has to audit you after your filing. Typically, the IRS has three years to audit tax returns after they are filed. If you are flagged for an audit, it has usually been within this window.

If the IRS suspects suspicious activity like underreported income, they can have up to six years to audit your information. The problem here is that this understatement is usually defined as leaving off 25% off income, which is a topic that is constantly being debated in the courts.

The courts dismissed a recent IRS case against a taxpayer who understated the amount of profits from a property sale, as the IRS was deemed to be outside the three-year window, even though they had suspected an underpayment. Now, what was interesting about this case was that the taxpayer actually omitted income by overvaluing the sold property, thereby showing his return as lower than it actually was. Because of lack of clear definitions, this did not fit under the income understatement extended window.

Due to this ruling, Congress clarified the definition a bit in 2015 by adding overstatement of values or losses to consideration for extended time windows for audits. This allows the IRS to expand their definition for omission of income, and can leave unaware taxpayers susceptible to these new definitions.

While any returns filed after July 31, 2015 fall under this new criteria, so do any returns that are still within the three-year statue of limitations window. Therefore, you may now find yourself subject to an audit for up to six years if you are suspected of understatement.

If you are a taxpayer in a situation that may leave you open to an audit in the new definition, speak with a qualified firm like Attorneys Tax Relief LLC to make sure you are updated on all of the changes to regulations. An experienced legal team will be able to help you handle your immediate needs and can make sure you are never caught off guard by IRS changes.