Quick Summary
The IRS can go back 3 years to audit your tax return if you file your return on time and report all income accurately. If the IRS finds substantial errors, it can go back 6 years. And if you don’t file a return or file a fraudulent return, there is no time limit on audits.
How Far Back Can the IRS Audit?
In general, the IRS can go back 3 years to audit your tax return. This is known as the statute of limitations on audits. Here are the key factors that determine how far back the IRS can go:
You Filed Your Return On Time
If you filed your tax return by the filing deadline (typically April 15 for most taxpayers), the IRS generally has 3 years to initiate an audit. This statute of limitations starts running on the filing deadline of the return year in question.
For example, if you filed your 2018 tax return by April 15, 2019, the IRS has until April 15, 2022 to audit the 2018 return. If no audit is initiated by that date, the 2018 tax year is closed and the IRS can no longer review or change that return.
You Underreported Income
If the IRS determines that a taxpayer “substantially understated” their income, the IRS has up to 6 years to initiate an audit. A substantial understatement occurs if you underreported your income by more than 25%.
For example, if you reported $40,000 of income but the IRS determines you actually had $60,000 of income, that’s a substantial understatement. The IRS would have 6 years to audit your return in this case.
You Didn’t File a Return
If you didn’t file a tax return at all, the statute of limitations never starts running. In this case, the IRS can initiate an audit at any time in the future.
You Filed a Fraudulent Return
If you filed a fraudulent tax return or no return at all, the IRS has an unlimited amount of time to audit you. There is no statute of limitations in cases of tax fraud.
When Does the Audit Time Limit Reset?
In some cases, the audit time limit can be paused or reset, giving the IRS more time to review your returns. Here are two main situations when this occurs:
You Amended Your Return
If you file an amended tax return that substantially changes your income, deductions, or other tax information, the IRS gets additional time to audit. The audit time limit is reset, starting from the date you filed your amended return.
The Audit Is Appealed
If you appeal an IRS audit and go through the appeals process, the time limit gets paused. The audit time limit resumes running after the appeals process concludes.
When Can the Audit Time Limit Be Extended?
In limited cases, the IRS can request an extension to the audit time limit. Here are two scenarios when this occurs:
More Time Is Needed to Gather Information
The IRS can request an extension if they need more time to gather information to make an audit determination. For example, if they request foreign bank account records that take longer to retrieve.
The Taxpayer Agrees to Extend
The IRS can extend the audit deadline if the taxpayer agrees. You may choose to extend the deadline if you need more time to prepare audit documentation or await the resolution of a related tax issue.
How Many Years of Tax Returns Do Audits Cover?
When the IRS initiates an audit, they will often review multiple years of tax returns. Here is how many years an audit may cover:
Audit Reason | Number of Years Reviewed |
---|---|
Routine random audit | Usually just 1 year |
Substantial underreporting of income | Up to 6 years |
Suspected tax fraud | Unlimited years |
Claiming excessive losses | Usually 3 years |
Related to amended return | Years impacted by amended return |
In some cases, the IRS will initially audit one year, then expand to other years if issues are uncovered. The scope depends on the circumstances triggering the audit.
When Is the IRS Most Likely to Audit?
The IRS has up to 3 years to initiate an audit. But most audits begin sooner rather than later. Here is when you may be most at risk of an IRS audit:
Within 1 Year of Filing
The IRS prefers to initiate audits as soon as possible after a return is filed. More than one-third of audits begin within 12 months of the filing deadline.
During Popular Credit Claim Years
Historical data shows spikes in audits during years when new tax credits are introduced or become more generous. More taxpayers claim credits, increasing IRS interest.
Following Significant Life Events
Getting married, having a child, buying a home, or retiring can all trigger IRS attention. Life changes often impact taxes owed.
Does the Audit Time Limit Run Separately for Spouses?
For married couples who file joint tax returns, the audit time limit generally applies jointly to both spouses. Events that pause or extend the time limit for one spouse would impact the other spouse as well on a joint return.
However, for married persons who file separate returns, the audit time limits apply separately to each spouse based on their specific tax situation.
Can You Reduce Your Audit Risk?
While there’s no way to completely avoid IRS audit risk, you can take proactive steps to minimize your chances of being audited. Recommendations include:
- Always report all your income accurately.
- Keep thorough documentation to support all deductions and credits claimed.
- Be conservative in ambiguous situations when determining what to claim.
- Avoid claiming exotic tax deductions or credits that may draw scrutiny.
- Be consistent in the items and amounts claimed from year to year.
What If You Never Filed a Return?
If you failed to ever file a tax return, you remain at perpetual risk of being audited by the IRS. There is no statute of limitations until a return is filed. If you failed to file any returns, it is advisable to consult a tax professional as soon as possible.
They can assist in filing any outstanding returns and representing you before the IRS to minimize penalties. Filing outstanding returns does not necessarily prevent an audit, but begins the clock running on the normal 3-year audit time limit.
Can the Time Limit Run Out During an Audit?
Yes, it is possible for the audit time limit to expire while you are already under audit. This prevents the IRS from assessing any additional tax for that year. However, it does not necessarily end the audit itself.
The IRS can continue the examination to carry over issues to other open years not protected by the statute of limitations. If you amended your return, the audit clock resets and the IRS gets additional time.
When Does the Time Limit Expire for State Tax Audits?
Most states have their own time limits for initiating audits that are similar to the IRS. However, some states give themselves more time or have exceptions that give them unlimited time in cases of substantial underreporting or fraud.
It’s important to understand your specific state’s rules on audit time limits. A tax professional can advise you on your state’s regulations.
Can the Time Limit Be Extended Indefinitely?
The IRS can essentially extend the audit time limit indefinitely if there is evidence of willful tax evasion or fraud. When intentional deception is uncovered, the IRS is no longer constrained by normal audit deadlines.
They will have unlimited time to recover lost tax revenue. Evidence of criminal tax activity can also lead to involvement by the Department of Justice, which has its own statutes of limitations.
Can You Get Audited Again After It’s Closed?
It is possible for the IRS to audit a tax year more than once. Even after an audit ends and the time limit expires, they can initiate a subsequent audit of the same return if they later uncover new evidence of underpayment.
This occurs most often when they obtain information not available in the first audit, such as finding hidden income sources. However, the normal restrictions still apply unless fraud is proven.
What If You Never Got the Audit Notice?
The audit time limit is based on when the IRS initiates the audit – not when you receive notice. Often, the IRS will begin an audit 1-2 years before the time limit expires. But you may not get the notice until later due to mail delays.
If you believe the audit deadline has passed, contact the IRS immediately to clarify. But don’t assume the deadline has lapsed just because you just received notice.
Can the IRS Audit a Deceased Person?
Yes, the IRS can initiate audits on deceased individuals. The same time limits apply based on when their last return was filed. The audit and any tax issues would be addressed with their estate or surviving spouse.
In some cases, an audit on a deceased person aims to collect unpaid taxes from assets left to heirs. The IRS can audit and assess taxes on a deceased person indefinitely if no final return was filed.
When Does the Audit Time Limit End?
The audit time limit ends strictly on the 3- or 6-year anniversary date of the return’s original filing deadline. For example, a 2018 return filed by April 15, 2019 expires on April 15, 2022 – three years later.
The deadline is not extended if it falls on a weekend or holiday. The IRS must initiate an audit by the last business day before the anniversary cutoff date.
Can You Negotiate with the IRS on an Extension?
Sometimes taxpayers wish to negotiate with the IRS when asked to extend the audit deadline. This can be done, but requires careful consideration of your motivations and the IRS’s incentives.
Their goal is extending the deadline indefinitely. However, they may agree to a fixed short extension if you need more time to prepare records or await resolution of a related issue.
What If You Amended After Being Audited?
Amending a return after it’s already been through an IRS audit creates a gray area. The IRS could potentially argue the audit time limit has been reset, even if the changes are unrelated to the original audit scope.
To avoid renewing audit exposure, some taxpayers opt to make minimal reporting changes after audit closure until the original time limit passes.
When Should You Consult a Tax Professional?
Given the complexity around IRS audit time limits, it is advisable to consult a tax professional if you are facing an audit or have concerns about your audit exposure. An Enrolled Agent, CPA, or tax attorney can provide guidance on:
- The applicable audit time limit for your circumstances
- Strategies to reduce audit risk exposure
- Responding to an audit notice and navigating the audit process
- How amending returns or appeals impact the audit deadline
- Negotiating with the IRS on deadline extensions
- Ensuring proper compliance with state audit time limits
With an experienced tax advisor on your side, you can better understand where you stand and assert your rights under IRS and state audit time limit rules.
Conclusion
The IRS has 3 years to audit after you file your tax return on time, 6 years if substantial underreporting is found. No deadline exists if you never filed or committed fraud. Amending a return and going through appeals can pause the audit clock. Consult a tax pro to fully understand your situation.