The Length of the IRS Statute of Limitations

Posted by: Brookside Admin

For some individuals and business owners, there's a slight period of angst related to filing taxes. Until your refund is returned, some of us worry that an audit may be pending or that they made a mistake on their taxes. While the reception of a refund check sets most minds at ease, it actually doesn't mean that you're free and clear. At Forbes, Robert Wood explains the statute of limitations for tax returns and why, in some cases, you're never beyond the IRS's reach. 

  • 3 Years

The basic statute of limitations is 3 years, which means the IRS has 3 years from the time you file your return to come back and audit you. This is true of every return, not just those with severe criminal action. You may have simply miscalculated, forgotten to include part of your income, or incorrectly claimed a deduction, but the IRS can still punish you for these mistakes up to 3 years later. 

  • 6 Years

In more extreme cases, the IRS gets double the amount of time to audit you for a false tax return. If you omit more than a quarter of your income from your return, it automatically triggers this 6-year statute of limitations. Making other egregious errors or willfully committing tax fraud or failing to file altogether also initially trigger a 6-year period, but for these serious offenses the statute of limitations is often extended. 

  • Indefinite

There are a number of ways the IRS can tack on extra time to audit or indict tax criminals. In any case, the IRS can request an extension. This is usually a one-year extension and you, the taxpayer, have to sign a form allowing the extension. It's generally advised that you sign off on an extension, but you can limit some terms of it with professional help. Another loophole is when the statute of limitations actually starts. For small errors, the three year period begins when your tax return is filed, but what if you willfully refuse to file at all? Your six-year period would start at your missed deadline, but any subsequent action deemed to be related to this missed deadline could reset the clock. For example, if the guilty party attempts to hide money they failed ot file for, the 6-year statute is reset. If they lie to an official about their return, it's also reset. There are a number of scenarios the IRS can use to argue they have more time to prosecute, which means in these severe cases there's no statute of limitations at all. 

Why do you need to know the IRS's statute of limitations? Because it helps illustrate how important correctly filing your taxes is. The reason so many mistakes are caught and taxpayers audited is because the IRS has plenty of time to comb through your tax return. Trust your return with Brown Kinion and Company. Our staff features years of experience filing both individual and business taxes and getting the refund you deserve. Call us today