We usually have this question in mind "how long does the IRS have to audit tax returns?" The answer is almost three years! Usually, it takes three years to audit, but sometimes it is longer, like for a good four to five years…or maybe around six years…alright, it is the final answer—six years, and not a year more than that.
You would probably think that the IRS agent with a crisp and formal dress with a tie will be specific about the answer to this question. The IRS says that it audits the tax returns as soon as possible after they are filed. That means mostly audits apply to returns that were filed within the last two or three years.
For the inconsistent taxpayers whose starting audit leads the investigators to look into the past, the agency keeps its options open for them. In such cases, they might go for the clues back up to five-six years. The IRS says that they include the returns filed within the last three years in an audit. If they encounter a significant error, it may result in the addition of extra years. But they do not usually go beyond six years.
The good part is that most people like us, who obey the rules and laws, are mostly held to the limit of three years. That is why the advice is given that to keep the tax returns at least for three years.
What is the IRS?
The IRS stands for Internal Revenue Service. It is a state tax authority in the United States of America that makes an income tax audit for the examination of the business and individual tax returns. The agency contacts the taxpayers by mail to let them know that they are selected for the audit. The IRS does not call or never start an audit in person.
Why will you be selected for the audit?
The IRS uses several different methods to select the taxpayers for an audit. It is not always that there is a problem in your tax case, so that you will get selected for an audit.
- Computer screening and random selection: Sometimes, the tax returns get selected based only on the statistical formulae. The IRS conducts the National Research Program to develop the criteria from the audits of random samples of returns that are statistically valid. They compare your tax return against those norms.
- Related examinations with other returns: The IRS may select your returns if they involve some issues or the transactions with other taxpayers who were selected for the audit.
What should you provide in an audit?
The IRS always sends you a written request about the essential documents they want. Those documents must support the income, credits, or deductions claimed by you on your return. These are the documents available to you because you would have used them to file your return. So the good part is no need to create new documents. Also, the records requested by the IRS include receipts, bills, canceled checks, and legal papers such as criminal defense papers, divorce settlements that include custody agreements, tax preparation, or property acquisition.
What are the ways of the IRS to conclude an audit?
- No change: This is the audit in which there is no change in the end results, and all of the items get reviewed.
- Agreed: In this audit, the IRS suggests the changes, and you get agreed with them.
- Disagreed: Here, the IRS suggests the changes that you understand, but you refuse to accept them. You disagree with the changes.
What are your rights in a tax audit?
As a taxpayer, you have some rights that you must not underestimate. These are your rights:
- You have a right to have privacy and confidentiality in your tax case.
- You have a right to ask the IRS why they need the information and how they will use it. You can also know what will happen if you do not provide the information that they ask for.
- You have a right to expect professional and respectful treatment from the IRS.
- You also get a right to get an authorized representative, or you can represent by yourself.
- You have the right to disagree with the findings if they do not satisfy you. You can appeal a disagreement between the IRS and the court.
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