The IRS has recently had its auditing period doubled from three years to six years. This is big news for people who have either tried to claim questionable deductions or who have failed to report income entirely. But there’s so much more to this issue than just these things.
We’re going to show you some of the things you have to consider in relation to the new rules.
Some Audits Are Forever
If you have never submitted a tax return or some tax forms were left out, the IRS can go back any number of years. People who simply tried to avoid filing entirely could see their tax affairs researched all the way back to when they were first eligible to submit a return.
There’s no statute of limitations for certain tax mistakes.
Remember that the IRS statute for collections is actually much more than six years. If there is a collection to be made, they can go back ten years before it expires. In other words, if the IRS believes they are owed money they can go back at least a decade.
Failing to report $5,000 or more in foreign income will also allow the IRS to look back six years, which brings it back into line with every other form of account. The collection statute still applies. You should also keep in mind that the IRS is paying particular attention to funds sheltered in offshore accounts.
This should show you that you need to keep extensive and accurate tax records. Consulting with a tax professional to ensure accuracy is always worthwhile, especially considering these new auditing rules.
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