Q: After what period is my federal tax return safe from audit?
A: Generally, the time-frame within which the IRS can examine a federal tax
return you have filed is three years. To be more specific, Code Sec. 6501
states that the IRS has three years from the later of the deadline for filing
the return (usually April 15th for individuals) or the date you actually filed
the return. This means that if you file your return on May 10, 2009, the IRS
will have until May 10, 2012 to look at it and "assess a deficiency;" not April
17, 2012.
There are exceptions and caveats to this general principle, however. If you
file prior to April 15, the IRS still has until April 15 of the third year that
follows to audit your return. This means that if you filed an income tax return
on February 10, 2009, you still won't be out-of-the-woods until April 15, 2012.
For taxpayers who file fraudulent returns, incorrect returns with the intent to
evade tax, and those who do not file at all, the IRS may open an audit at any
time.
(Don't confuse the deadline for IRS tax assessments with your right to file a
refund claim for an amount that you overpaid, either on a filed return or
through withholding or estimated tax payments. That deadline is the later of
three years from the filing deadline or two years from your last tax
payment.)
You may also find some comfort in the practical IRS audit-cycle rhythm. While
you are never truly beyond an audit until the statute of limitations has
properly run, there are some general standards to keep in mind. Office audits
are usually done within 1 1/2 years of the time the return was filed, and field
office audits are complete by 2 1/2 years. The rule of thumb is that if you
haven't been contacted within this time frame, you're probably not going to be.
Especially for small businesses, the IRS has promised to shorten its normal
audit cycle so that those taxpayers are not "left hanging" on potential tax
liabilities (with interest and penalties) until the three-year limitations
period has expired. Whether this shortened period happens, however, is still
open to speculation. Most businesses should continue to make it a practice to
keep "tax reserves" to cover such audit liabilities.
A: Generally, the time-frame within which the IRS can examine a federal tax
return you have filed is three years. To be more specific, Code Sec. 6501
states that the IRS has three years from the later of the deadline for filing
the return (usually April 15th for individuals) or the date you actually filed
the return. This means that if you file your return on May 10, 2009, the IRS
will have until May 10, 2012 to look at it and "assess a deficiency;" not April
17, 2012.
There are exceptions and caveats to this general principle, however. If you
file prior to April 15, the IRS still has until April 15 of the third year that
follows to audit your return. This means that if you filed an income tax return
on February 10, 2009, you still won't be out-of-the-woods until April 15, 2012.
For taxpayers who file fraudulent returns, incorrect returns with the intent to
evade tax, and those who do not file at all, the IRS may open an audit at any
time.
(Don't confuse the deadline for IRS tax assessments with your right to file a
refund claim for an amount that you overpaid, either on a filed return or
through withholding or estimated tax payments. That deadline is the later of
three years from the filing deadline or two years from your last tax
payment.)
You may also find some comfort in the practical IRS audit-cycle rhythm. While
you are never truly beyond an audit until the statute of limitations has
properly run, there are some general standards to keep in mind. Office audits
are usually done within 1 1/2 years of the time the return was filed, and field
office audits are complete by 2 1/2 years. The rule of thumb is that if you
haven't been contacted within this time frame, you're probably not going to be.
Especially for small businesses, the IRS has promised to shorten its normal
audit cycle so that those taxpayers are not "left hanging" on potential tax
liabilities (with interest and penalties) until the three-year limitations
period has expired. Whether this shortened period happens, however, is still
open to speculation. Most businesses should continue to make it a practice to
keep "tax reserves" to cover such audit liabilities.