How Far Back Can the IRS Go When Auditing Your Business

Are you worried about the IRS auditing your business? Learn more about tax audits and how far back the IRS can go to review your business finances.

What Is a Tax Audit?

A tax audit is an examination of your financial information and accounts by the IRS to ensure you have reported your income and deductions accurately. The IRS may conduct audits randomly or if they suspect errors or fraud in your tax returns.

Unique Concerns for Tax Audits

The people and businesses most concerned about tax audits tend to have complex financial transactions, high incomes, or inconsistent reporting on past returns. Keep detailed records and stay compliant with tax laws to lower your audit risk.

Nuances by State

Different states may have varying statutes of limitations on tax audits, which affects how far back the IRS can go. Check your state's specific rules to work out the audit timeframe.

How Far Back Can the IRS Go?

The general rule is that the IRS has three years from the filing date to audit your tax return. However, if substantial errors are found or fraud is suspected, the IRS can go back up to six years. In cases of tax evasion or non-filing, there is no statute of limitations, meaning the IRS can audit at any time.

Example Scenarios

• Scenario 1: If you submitted your tax returns three years ago and the IRS finds errors, they can audit back to the date of that return.
• Scenario 2: In case of suspected fraud, the IRS can review returns from the past six years to identify discrepancies.

To protect your business from tax audit risk, report accurately and keep thorough financial records. For questions about tax audits and legal compliance, consult a tax professional.

Still have questions about tax audits? Our blog has more on the topic.

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