How Far Back Can the IRS Audit You? The IRC §6501 Assessment Periods

“Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period. For purposes of this chapter, the term “return” means the return required to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer has received an item of income, gain, loss, deduction, or credit).”

“(1) Early return | For purposes of this section, a return of tax imposed by this title, except tax imposed by chapter 3, 4, 21, or 24, filed before the last day prescribed by law or by regulations promulgated pursuant to law for the filing thereof, shall be considered as filed on such last day. | (2) Return of certain employment and withholding taxes | For purposes of this section, if a return of tax imposed by chapter 3, 4, 21, or 24 for any period ending with or within a calendar year is filed before April 15 of the succeeding calendar year, such return shall be considered filed on April 15 of such calendar year.”

“Except as otherwise provided in subsection (c)— | (1) Income taxes | In the case of any tax imposed by subtitle A— | (A) General rule | If the taxpayer omits from gross income an amount properly includible therein and— | (i) such amount is in excess of 25 percent of the amount of gross income stated in the return, or | (ii) such amount— | (I) is attributable to one or more assets with respect to which information is required to be reported under section 6038D (or would be so required if such section were applied without regard to the dollar threshold specified in subsection (a) thereof and without regard to any exceptions provided pursuant to subsection (h)(1) thereof), and | (II) is in excess of $5,000, | the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.”

“(B) Determination of gross income | For purposes of subparagraph (A)— | (i) In the case of a trade or business, the term “gross income” means the total of the amounts received or accrued from the sale of goods or services (if such amounts are required to be shown on the return) prior to diminution by the cost of such sales or services; | (ii) An understatement of gross income by reason of an overstatement of unrecovered cost or other basis is an omission from gross income; and | (iii) In determining the amount omitted from gross income (other than in the case of an overstatement of unrecovered cost or other basis), there shall not be taken into account any amount which is omitted from gross income stated in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature and amount of such item.”

“(1) False return | In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.”

“(2) Willful attempt to evade tax | In case of a willful attempt in any manner to defeat or evade tax imposed by this title (other than tax imposed by subtitle A or B), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.”

“(3) No return | In the case of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.”

“(4) Extension by agreement | (A) In general | Where, before the expiration of the time prescribed for the assessment of any tax imposed by this title, except the estate tax provided in chapter 11, both the Secretary and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.”

“(B) Notice to taxpayer of right to refuse or limit extension | The Secretary shall notify the taxpayer of the taxpayer’s right to refuse to extend the period of limitations, or to limit such extension to particular issues or to a particular period of time, on each occasion when the taxpayer is requested to provide such consent.”

“If an audit is not resolved, we may request extending the statute of limitations for assessment tax. The statute of limitations is a time period established by law when IRS can review, analyze, and resolve your tax-related issues. When the statutory period expires, we can no longer assess or collect additional tax, or allow you to claim a refund. It is generally three years after a return is due or was filed, whichever is later.”

“You don't have to agree to extend the statute of limitations date. However, if you don't agree, the auditor will be forced to make a determination based upon the information provided.”

“Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years.”

“The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly, most audits will be of returns filed within the last two years.”

“Should your account be selected for audit, we will notify you by mail. We won't initiate an audit by telephone.”

“The IRS conducts audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or at the taxpayer's home, place of business, or accountant's/representative’s office (field audit). Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you receive.”

“If we conduct your audit by mail, our letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions. If you have too many books or records to mail, you can request a face-to-face audit. The IRS will provide contact information and instructions in the letter you receive.”

“Some examinations are handled entirely by mail. Examinations not handled by mail can take place in your home, your place of business, an Internal Revenue office, or the office of your authorized representative. If the time, place, or method is not convenient for you, the examiner will try to work out something more suitable. However, the IRS makes the final determination of when, where, and how the examination will take place.”

“Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.”

“The information below reflects the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date. | Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return. | Period of limitations that apply to income tax returns | Keep records for 3 years if situations (4), (5), and (6) below do not apply to you. | Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. | Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. | Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. | Keep records indefinitely if you do not file a return. | Keep records indefinitely if you file a fraudulent return. | Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.”