Here’s what you should know about an IRS audit:
- Usually, a taxpayer will only be subject to one audit per tax year.
- The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.
There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.
- If following an audit, the IRS determines you owe additional taxes, you will receive a statutory notice of deficiency. This is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.
- The IRS normally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements, or the IRS obtains court judgments.
There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer’s bankruptcy or there’s an ongoing collection due process proceeding involving the taxpayer.