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How Far Back Can the IRS Audit You?

Image of a blank 1040 tax form with a large, red, “AUDIT” stamped on the front.

Understanding how far back the IRS can audit your tax returns is crucial for managing your financial records. The IRS statute of limitations sets the time frame during which an audit can be conducted, typically ranging from three to six years, but sometimes longer depending on specific circumstances.

Here, we’ll learn just how far back the IRS can bring an audit against you. Knowing these limitations helps taxpayers stay informed and prepared, alleviating some of the stress associated with tax audits. Lothamer Tax Resolution specializes in guiding individuals and businesses through the complexities of IRS audits, offering expert assistance to navigate these challenges confidently.

A Closer Look at the IRS’ Statute of Limitations

The standard statute of limitations for the IRS to audit a tax return is three years from the date the return was filed. This means that once three years have passed, the IRS generally cannot initiate an audit for that tax year. This period begins from the later of the due date of the return or the actual filing date.

There are notable exceptions to the three-year rule. If you have substantially underreported your income by more than 25%, the IRS can extend the audit period to six years. Additionally, there is no statute of limitations for fraudulent returns or when no return is filed at all. These exceptions highlight the importance of accurate and timely tax reporting.

How It Works in Your Favor

Understanding the statute of limitations can work in your favor by providing a clear timeframe for audit risk. After the statute of limitations has expired, you can be more confident that the IRS will not review that tax year. This knowledge allows for better financial planning and record retention policies so that you only keep necessary documents for the required period. By partnering with a trusted tax specialist like Lothamer Tax Resolution, you can become fully informed about these timeframes and how to manage them effectively.

The Most Common Reasons for the IRS to Audit You

Red Flags

Certain red flags can increase the likelihood of an IRS audit. High-value deductions that seem disproportionate to your income, such as large charitable donations or extensive business expenses, can attract attention. Reporting significant changes in income from one year to the next can also be a red flag.

Also, mismatched income reports, where the income reported on your tax return doesn’t match the information the IRS receives from third parties like employers or banks, can trigger an audit. Ensuring all reported figures are accurate and well-documented mitigates this risk.

Random Selection

The IRS uses a computerized system to randomly select tax returns for audit. This system compares your return against statistical norms and assigns a score based on the likelihood of errors. While this means anyone can be audited, maintaining accurate records and honest reporting can mitigate the stress of an unexpected audit.

Business Audits

Businesses, especially small and cash-based ones, face a higher risk of being audited. Factors such as inconsistent income reporting, large deductions, and frequent losses can raise red flags. The IRS scrutinizes business expenses for legitimacy and necessity. To avoid issues, businesses should keep detailed and organized records, including receipts and explanations for all deductions.

With a clear understanding of the common reasons behind many audits, taxpayers can take proactive steps to minimize their risk. Proper documentation and accurate reporting are key to avoiding the pitfalls that lead to IRS scrutiny. Should an audit occur, being prepared with thorough records can make the process smoother and less stressful.

What Can Lothamer Tax Resolution Do to Help?

  1. Expert Guidance: Lothamer Tax Resolution provides personalized strategies for audit defense, helping you navigate the complexities of an IRS audit. Our experienced professionals understand the intricacies of tax laws and can guide you through every step of the audit process. We tailor our approach to your specific situation so that you clearly understand what to expect and how to prepare.
  2. Negotiation and Representation: Handling communications and negotiations with the IRS can be daunting. Lothamer Tax Resolution acts as your representative, managing all interactions with the IRS on your behalf. Our experts work to negotiate the best possible outcomes, whether it involves reducing penalties, setting up payment plans, or challenging audit findings. With us by your side, you can be confident that your interests are well-protected.
  3. Ongoing Compliance Support: Maintaining compliance with tax laws is crucial for avoiding future audits and penalties. Lothamer Tax Resolution provides ongoing support to ensure your tax returns are accurate and compliant. We advise on best practices for record-keeping, deductions, and reporting to minimize audit risks. Our goal is to provide continuous assistance, giving you peace of mind and helping you stay on top of your tax obligations.

By partnering with Lothamer Tax Resolution, you can confidently navigate IRS audits, knowing that you have expert support and representation every step of the way. Our comprehensive services address your immediate concerns and help you maintain compliance in the future.

Navigating IRS Audits with Confidence

Knowledge about the IRS statute of limitations and common audit triggers can help you better prepare for potential audits. Addressing these issues proactively and having a trusted partner like Lothamer Tax Resolution can make a significant difference.

Our expertise in tax resolution and audit defense ensures you’re well-equipped to handle any challenges. By staying informed and seeking professional guidance, you can confidently navigate the complexities of IRS audits and protect your financial well-being.

Partner With Lothamer Tax Resolution for Expert Tax Assistance

If you’re facing an IRS audit or need assistance with tax compliance, contact Lothamer Tax Resolution. Our knowledgeable team is ready to provide expert guidance and support. Let us help you achieve peace of mind and financial stability. Reach out to us online or call us at 877-955-9020 today to learn more about our services and how we can help you navigate the complexities of tax audits and compliance.

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