How Far Back Can the IRS Audit You? 

The IRS will usually only go back up to three years in audit, but there are key exceptions to that rule that should be noted. The federal tax statute of limitations is three years and begins to run on the date you file your taxes or the due date for that year’s tax filing (such as April 15), whichever is later. In other words, unless an exception applies, the IRS cannot go back past three years to audit you.  

When the IRS can Go Back Further Than Three Years 

As you might expect, there are a number of exceptions to this rule. Here are the statutes of limitations if your situation fits into one of these exceptions:  

  • Six years: This is the statute of limitations if the IRS identifies a substantial error, such as for large understatements of income, significantly embellished deductions, unreported foreign income, if you omitted more than $5,000 of foreign income, or for basis overstatements. The general rule of thumb for what qualifies as a large understatement of income is if you left off more than 25 percent of your gross income. For example, if you earned $500,000 and only reported $300,000, you are subject to the six year statute of limitations since you left off 40 percent of your gross income. An example of a basis overstatement would be if you sell a piece of property for $4 Million, and claim that what you invested in the property (your basis) was $2 Million, when your basis was really only $1 Million. This has the effect of you paying tax on $2 Million of gain when you should have paid tax on $3 Million of gain.  
  • Unlimited statute of limitations: The IRS can examine any tax return from any year if you either did not file a tax return for a specific year, or if you may have acted fraudulently. There is also an unlimited statute of limitations if you fail to file Form 3520, which relates to foreign income, inheritances, or gifts of more than $100,000. If you did not file a return for a given year, or simply forgot to sign your return, then the statute of limitations never began to run. If the IRS has information and knowledge that you may have acted fraudulently, then this is akin to the IRS reserving the right to get to the bottom of this matter no matter how many years it must go back. In either situation, the IRS can go back as far as it wants to audit you. 

Do Not Fight Your Tax Audit Alone  

As you can see, IRS rules and regulations are significantly nuanced and complex. And given the potentially negative ramifications of an audit from the IRS, our attorneys at Ayar Law highly recommend that you consult with an experienced IRS audit lawyer as soon as you receive notice of the audit or are concerned about being audited in the future.  

A Firm That Understands the IRS Audit Process 

Since 2012, our attorneys at Ayar Law have has stood shoulder-to-shoulder with clients facing a stressful IRS income tax audit. Because we focus our practice on tax law, we know how the IRS really works, which helps us maximize our clients’ results.  

If you have questions about how far back the IRS can audit you, call Ayar Law today to book scheduling a zero-cost, zero-obligation consultation. Facing theThe IRS can feel dauntingis a daunting adversary, but you are not alone.do not have to fight them alone.