IRS Audit Statute of Limitations

IRS Statute of Limitations on Audits and Assessments

The IRS generally has three years from the tax return due date to audit your return and assess additional tax, but there are a number of exceptions to this rule. If you file after the due date, the IRS has three years from the date you file. 

This deadline is referred to as the audit statute of limitations. In cases involving significant income understatement or tax fraud, the IRS has six years to audit your return. There is no deadline to audit a return that has not been filed, as the clock doesn’t start until you file.

Key Takeaways

• Audit deadline – The IRS has three years to audit most tax returns.
• Six-year audit deadline – The IRS has six years if you significantly underreport your income or commit fraud.
• No deadline – If you don’t file, the IRS can assess tax against you at any time.
• Refund deadline – You have just three years to claim a tax refund.
• Amended returns – The IRS has 60 days to review amended tax returns and assess tax if the ASED has passed.

To get help dealing with a tax audit or to talk about other tax problems, contact us at the W Tax Group today.

The Statute of Limitations for IRS Tax Audits

The IRS has the following time limits to audit tax returns once they have been filed.

Three-Year Period for IRS Audits

The IRS gets three years to audit your return and assess additional tax. The clock starts ticking on the date your return is due or when you file, whichever comes later. The final day the IRS can assess taxes on a filed return is called the Assessment Statute Expiration Date (ASED).

Once the ASED passes, you can’t be assessed additional tax for that tax return unless one of the exceptions listed below applies.

Six-Year Period for IRS Audits

The IRS has six years to assess tax when any of the following circumstances exist:

• Your return contains a substantial error. A substantial error is an understatement of income of 25% or more. A basis overstatement can also qualify as a substantial error.
• You fail to report more than $5,000 in income from a specified foreign asset. 

Unlimited Time for IRS Audits

The IRS has unlimited time to impose tax in the following situations:

• Tax fraud. If you file a false or fraudulent return, the IRS has unlimited time to assess additional tax. The burden is on the IRS to show that the legal standard for tax fraud is present.
• Unfiled returns. The clock doesn’t start on the ASED until you file your return. If you don’t file a return when you are legally required to, you give the IRS unlimited time to audit your return, file a substitute return on your behalf, or assess tax against you.

The audit or assessment statute of limitations is very closely associated with the statute of limitations on claiming a refund.

The Statute of Limitations on Claiming a Refund

You must file your tax return within three years of the due date to receive your tax refund. For example, 2024 tax returns were due on April 15, 2025. You must file a return by April 17, 2028, to receive a refund.

There is no penalty for filing your return late if you are owed a refund. You may be eligible for a tax refund even if you are not legally required to file a return.

Workers who have taxes withheld from their paychecks need to file a tax return to get that money back. Even if you didn’t have any taxes withheld from your wages, you could still receive a refund if you are eligible for a refundable tax credit, such as the Earned Income Tax Credit.

What If You Claim a Refund With an Amended Tax Return?

If you file a tax return that contains errors, you may need to file an amended tax return to correct these mistakes. You can file an amended return using Form 1040X, but if you want to claim a refund, you must do so within three years of the original due date. There are very limited exceptions to this rule.

Only use Form 1040X if you have already filed a tax return for that year that the IRS has accepted. If you are amending your return to claim an additional refund, wait until you receive your initial refund check to file the 1040X.

For example, you might need to amend your return to receive an additional refund if you failed to claim all of your credits, deductions, or dependents. You don’t need to amend a return to fix math errors or if you forgot to attach tax forms. In those situations, the IRS will automatically fix the issue and send you a notice.

Events That Extend the Assessment Statute of Limitations

The IRS will get additional time to assess tax in the following situations:

• You amend a tax return – If the original ASED has passed or is close to the deadline, the agency gets 60 days to review the information on the amended return.
• The IRS sends a Notice of Deficiency – The ASED gets suspended from the date the IRS sends the notice for 90 days (150 days if you are out of the country).
• You appeal a notice of deficiency – the ASED does not resume until 60 days after the Tax Court issues a decision.

Extending the Tax Assessment Deadline

The IRS can extend the ASED by getting a taxpayer’s consent. If the IRS believes you may owe substantial additional tax for a tax year, but there isn’t enough time to conduct an audit before the ASED, they may ask you to agree to extend the tax assessment period.

You may want to negotiate limits on the scope or length of an ASED extension, or you may not want to allow an extension at all. A tax professional can help you decide which course of action is best for you.

Unfortunately, if the IRS selects you for an audit and you decide not to extend the deadline, the agency may rush through the audit process. Then, they may assess tax against you and send you a Notice of Deficiency. That letter pauses the assessment statute, and if you disagree, you may need to appeal in Tax Court.

FAQs About the IRS Audit and Other Statutes of Limitations

What is the difference between the audit and the assessment statute of limitations?

These phrases both refer to how long the IRS has to audit a return and assess taxes. The actual statute is called the assessment statute of limitations. 

What is the difference between the IRS assessment and collection statutes?

The assessment statute refers to how long the IRS has to review a tax return and assess additional tax. The collection statute refers to how long the IRS has to collect taxes once they have been assessed.

How long does the IRS have to collect taxes?

Once taxes have been assessed, the IRS has 10 years to collect. This is called the Collection Statute, and it also gets paused and extended for different types of actions. 

Why is there an assessment statute of limitations?

This rule is designed to protect taxpayers. It helps to ensure that taxpayers don’t have to worry about audits on returns they filed more than three years ago. It insulates taxpayers from facing unexpected tax liabilities on very old tax returns.

What is Form 872?

This is the form the IRS uses to extend the assessment statute of limitations. If you sign Form 872 (Consent to Extend the Time to Assess Tax), you will voluntarily extend the time the IRS has to extend taxes.

How long do you have to keep records?

You must keep tax records for at least three years. This ensures that you have the correct records in case the IRS audits you. However, there are some records that you must keep for six years.

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