Accounting Articles > IRS Audit:

How far back in time can the IRS audit?

Generally the statute of limitations for an IRS audit is three years after the date that the income tax return was filed. If, after an audit, the IRS can prove fraudulent intent, they can go back further than the thirty-six month statute. If they audit within the statute and find more than a twenty percent change in taxable income, they can prove fraudulent intent.

But many people are confused by these rules so let's use an example to illustrate them more clearly...

Let’s say that your 2010 income tax return was filed on April 15th of 2011. You get a notice saying that your 2010 return is being audited on March 1st of 2014. Can they do this? Yes. It’s within 36 months of the date that the return was filed.

Let's say that you had a bad accountant, and even worse representation during the audit. So on April 1st of 2014 you get a notice saying that they are also opening up the 2011 and 2012 income tax returns for audit. Can they do this? Yes. It’s not the same year, so it doesn't fall inside the double jeopardy rules, and the additional two years are within the thirty-six month statute.

Let's also say that in the initial audit, once the examination was done and your bad accountant had made even more mistakes, the taxable income on the return had increased by 35%. You now get a notice stating that they want to look at the returns for 2009, 2008, and 2007. Can they do this? Yes. Even though they are outside of the original statute of limitations, they can open up these years because they have exceeded the burden of proof for the definition of “fraudulent intent.” At this point, the IRS can go back and audit you as far as they would like.

If you are asking this question in the first place, then you need to seek adequate representation. As highly recommended CPA's and Enrolled Agents providing tax accounting services in the Chicagoland Area, we have the knowledge and experience necessary to protect you. Don't try to handle this yourself. Our Standard Accounting Services section has several options available. We can review your audit case for as little as $500 or represent you starting at $1,500. Call or e-mail one of our specialists today.