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What is the statute of limitations for tax audits?

Becoming the subject of an audit is nerve-wracking for any individual or business — no matter the circumstances. Although many of these tax questions can be resolved through correspondence with the Internal Revenue Service, there is always the possibility that an in-person audit will take place. Knowing this, many readers might be wondering how far back the tax officials can go when conducting an audit.

Unfortunately, the answer isn’t quite as simple as simple as some might like it to be. Generally speaking, the IRS can conduct a tax audit within three years of a filing. However, that statute of limitations can vary depending on the circumstances. For example, that period is extended to six years if the IRS says that a person has failed to claim more than 25 percent of his or her income.

The reality is that the IRS could conduct an audit on anyone, even if they have nothing to hide. This is why it’s best to be prepared and understand your rights in the event that tax officials come knocking. An experienced attorney can help answer questions related to an audit and help build a defense as necessary.

One of the things that may come up in discussions about the statue of limitations on audits is exactly when the three- or six-year period began. Again, this issue doesn’t necessarily have an easy answer. In some cases, the clock starts when a person files their taxes and in others it could begin at the time of the alleged wrongdoing.

Furthermore, the IRS may even ask taxpayers to voluntarily extend the limitations period. Agreeing to this — or failing to do so — could have major legal implications, which is why the decision should be carefully considered before making a move.

Source: Forbes, “How Far Back Can IRS Claim Tax Evasion Or Fraud? Timing Is Everything,” Robert W. Wood, Oct. 13, 2013

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