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

Individuals and businesses that care about tax audits are usually those with complex financial transactions, high income earners, or those with inconsistent reporting on tax returns. It's crucial to keep detailed records and ensure compliance with tax laws to minimize audit risk.

Nuances by State

Different states may have varying statutes of limitations on tax audits, affecting how far back the IRS can go. It's essential to understand your state's specific rules to determine 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.

If you want to protect your business from potential tax audit risks, ensure accurate reporting and maintain thorough financial records. For more information on tax audits and legal compliance, consult with a tax professional.

Still have questions about tax audits? Check out our blog for more insights and tips!

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