Brunoro Law Blog

Tuesday, September 20, 2016

IRS Might Have Six Years to Audit Taxes, Up From Three

What should I do if I am audited by the IRS?

Filing your taxes can be nerve racking.  Even those who file as diligently and accurately as possible may be worried about the potential for being audited due to the many complexities of tax law.  It is helpful to know how long the IRS has to bring an audit so that you can rest easy once this statute of limitations has passed.  Now, however, taxpayers may need to wait even longer because Congress has ruled that the IRS has six years to look back on your taxes in certain cases. 

Six Year Statute of Limitations for Omission of Significant Income

Traditionally, the IRS has three years to audit your filing, but several exceptions exist to give this government agency far longer.  If you omit more than 25 percent of your income on a tax filing, the IRS has six years to conduct an audit.  For years, controversy existed as to whether omit meant to leave income off entirely or included overstatement of your basis (what you initially invested).  The United States Supreme Court ruled in U.S. v. Home Concrete & Supply, LLC that overstating your basis was not the same as omitting income, and therefore the three-year statute of limitations applies in such cases.  Congress, however, overruled the High Court and gave the IRS six years six years to audit when the taxpayer overstated the basis of property sold. 

This is just one of several statute of limitation exemptions that can allow the IRS several years to potentially audit your taxes.  At times, the IRS will even request that taxpayers sign a document giving them more time for review. 

What To Do If You are Audited

If you receive notice of an IRS audit, stay calm and know that there are steps you can take to get through the audit process unscathed.  Your first step should be contacting an experienced tax audit attorney.  Your attorney will assist you in first reviewing the validity of the audit by checking the statute of limitations and other factors, and then carefully preparing for audit if necessary. For help with your tax controversy in California, contact the San Diego tax attorneys at Brunoro Law by calling (619) 493-3293.


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