The Internal Revenue Service (IRS) has the authority to audit tax returns for several years after the original filing date. The duration of this period depends on the type of tax return and whether there were any discrepancies or fraud detected.
For most individual tax returns, how far back IRS can audit payroll tax returns can be a three-year statute of limitations from the date of due or filed return, whichever is later.
However, there are some exceptions to this rule. If the IRS suspects a taxpayer has underreported their income by more than 25%, they can extend the statute of limitations to six years.
Additionally, if a taxpayer does not file a tax return or files a fraudulent return, there is no statute of limitations on the IRS’s ability to audit.
For businesses, the statute of limitations is generally longer than for individuals. The IRS can audit a business tax return for up to six years after it is filed. If a business omits more than 25% of its income, the statute of limitations extends to seven years.
In some cases, the IRS may also audit tax returns from even earlier years. For example, if the IRS finds evidence of fraud or a failure to file a return, they can go back as far as they need to in order to investigate the issue.
In cases where a taxpayer has not filed a tax return at all, a substitute returns could also be filed by the IRS on behalf of the taxpayer and assesses taxes owed for up to 10 years.
It is important for taxpayers to keep accurate and thorough records of their tax returns in case of an audit. While the likelihood of being audited is relatively low, it is still important to be prepared and ensure that all tax returns are accurate and complete.
If a taxpayer does receive an audit notice from the IRS, it is important to respond promptly and seek professional guidance if necessary.
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