When Can I Stop Worrying about an IRS Income Tax Audit? IRS Statute of Limitations (Part 1 of 3)
If you are worrying about an IRS Income Tax Audit, then you need to understand the IRS Statutes of Limitations and how the IRS works. The IRS Statutes of Limitations determine “How Long the IRS has to Audit your Income Tax Return.” The Two Most Important IRS Statute of Limitations Rules are the Three Year Statute of Limitation Rule and the Six Year Omission of Income Rule. The Three Year Statute of Limitation Rule: The IRS has three years from the date that a return is filed to complete an audit and mail you a letter proposing changes to your income tax return. This is the most important rule because the IRS audit division revolves around this rule. In other words, the overwhelming majority of audit that the IRS begins are audit within the Three Year Rule. The Six Year Omission of Income Rule: The IRS can prove that you failed to report 25% or more of your gross income, then the IRS has Six Years from the filing of an income tax return to compete the audit and mail you a letter proposing changes to your return. The Six Year Omission of Income Rule is important because it represents the risk that if the IRS discovers unreported income, then they IRS can expand the scope of the audit to go back more years to obtain tax more income. For more information, watch our youtube video.