How the IRS Can Increase Your Audit Window

Tax Day has come and gone, and usually comes the time of the year when people start to worry about their taxes potentially being flagged by the Internal revenue Service. An audit is possible, though the likelihood of such a reality is very low. Still, it is good to be knowledgeable of the subject, and last week we wrote a post about audits and some of the timetables for a person being audited.

But now let’s take a look at some of the rules and actions that can cause these time limits to change. First of all, it’s important to know that, in general, the IRS has three years to audit your filing. However, that window doesn’t trigger until your filing’s due date. In other words, filing early — like, say, in February — does not mean your “audit window” starts early. It reverts to April 15 if that was your due date.

Your audit window could also be doubled to six years under certain circumstances. For example, if you fail to include 25 percent or more of your income, then the IRS can audit your filing within six years. The window also doubles to six years if you fail to report $5,000 of foreign income.

Lastly, let’s get to the worst possible punishment: an unlimited timetable for auditing you. This happens if you completely fail to turn in a filing, or if you forget to sign your filing.

Regarding the latter, the IRS considers an unsigned filing to be an invalid filing and, thus, you haven’t actually turned in a tax filing. This can happen even to good people who are just trying to get their taxes done. People make mistakes. Any of these situations — but particularly an unsigned tax form that triggers unlimited time to audit the filing — necessitates some legal help to get you through this tricky time.

Source: Forbes, “Scariest Tax Errors: They Extend IRS Audits To Six Years Or Endlessly,” Robert W. Wood, March 30, 2015