How far back can the IRS audit you?

So you’ve received an IRS Audit notice and you’re about to break out into cold sweat. Lots of questions may be going through your mind, like how far back can the IRS audit me? Or why did the IRS choose to audit me?

Why the IRS has Chosen to Audit you

An IRS Audit doesn’t necessarily mean that you’ve done something wrong.

However, it does mean that something on your tax returns triggered their computer screening process. Because the screening involves comparing your tax return against the “norm”, often a tax return that falls too far out of the spectrum will raise an alarm.

Another cause for an IRS Audit might be that you did business with someone that is currently undergoing an audit. In such instances, the IRS needs to see data related to these transactions.

One of the chief concerns about an IRS Audit is how many years back the IRS audits. Surely, if the IRS goes back long enough, they’re bound to find something amiss right?

Remember: you should never go through an audit alone. A licensed professional can save you time, stress and in some cases – jail time. It only takes a minute to speak to an expert like Curadebt for FREE. Readers say they often feel more assured once they get a professional to face the IRS on their behalf. 

How Far Back Can the IRS Audit Me?

As of 2016, the IRS is allowed to go as far back as six years of your financial records. This recent update extended the previous limit of three years. This period is called the Statute of Limitations. It represents the absolute maximum that the IRS can go back when auditing you (by law.)

The IRS has claimed that they will typically only go back three years. They’ll do this unless they find “substantial errors” that are worth investigating. At which point, they’re likely to maximize the Statute of Limitations of 6 years.

Still, knowing how far back the IRS can go does little to allay people’s concerns. This stems from a lack of clarity in the IRS process.

In the next few sections, we’ll look at the types of IRS Audits, and the general process you can expect.

The Process

After receiving your financial information, the IRS can query you on the information in a three ways:

  • The field audit – IRS agents will conduct their work at your office or your house
  • The office audit – You’ll be summoned to an office within the IRS
  • The correspondence audit – This is the least stressful, as it involves the provision of information, and questioning via mail.

In a correspondence audit, you’ll be asked for various supporting documents and questions. In a field or office audit, you’ll sit down in person with an IRS officer to answer queries on your financial information.

Again, you should enlist the help of a tax expert to assist you with preparing and answering the IRS officials’ questions. Curadebt offers a FREE consultation to people facing IRS Audit problems.

IRS Audit Reconsideration

After the IRS releases its findings on the audit, you will have the opportunity to appeal the decision. This is officially called an IRS Audit Reconsideration.

The typical reasons you can employ for applying for a reconsideration include:

  • The assessments were made after the Statute of Limitations
  • The tax liability was illegally or erroneously assessed
  • The calculated taxes are excessive

While you have the right as a taxpayer to request for a reconsideration, the IRS is under no obligation to grant it to you. As such, it is absolutely imperative that you get a professional to assist you in crafting your appeal. They’ll know what arguments work and really “speak the language” of the IRS.

Should I Hire a Tax Professional When Audited?

Yes. For something as touchy as an IRS audit, I wholeheartedly recommend a licensed tax professional. Here are some reasons why you should hire a tax professional:

  • A tax specialist will have the expertise to respond to IRS queries in the best way possible.
  • They’ll also be able to help you put together the required documents such that no gaps will arouse doubt or suspicion in the auditing officers’ mind.
  • A tax specialist will also be able to advise you on whether the IRS has exceeded the Statute of Limitations, and whether you can fight against their request for an extension.
  • They can help to craft an appeal for an IRS audit reconsideration.

By having a representative, you won’t have to deal with the audit yourself. The IRS gives you the option of hiring a licensed CPA or tax attorney to represent you. In order to do that, you must sign the Form 2848.

One solid tax specialist you can look into is Curadebt. They offer tax relief and IRS audit defense services. You can use their free evaluation tool to determine if they can help with your IRS audit.