Can I Ever Be Audited Again, And If So, How Often?
The good news is that you generally can only be audited once for any single tax year. However, the IRS can audit you year after year. The Internal Revenue Manual, which is the inside policy of the IRS, states that if the IRS has already examined an issue on your tax returns for two previous years and the audit resulted in no change or a very small change, then the audit can be labelled as repetitive and will most likely be closed out. However, I have seen individuals and businesses being audited upwards of eight, nine or 10 years in a row. Unfortunately, it’s possible for the IRS to continue to audit you year after year.
How Far Back Can An Audit Go?
The general statute of limitations is three years from the date that your tax return is filed. However, this statute can be extended to six years if the IRS can show that the understatement on your original tax returns was substantial, meaning that 25% of income was not reported on the original tax return. In very severe cases when the IRS can show fraud, the IRS can extend the statute of limitations indefinitely.
What Happens After Someone Is Audited? Are They Put On A Watch List?
It is possible that an audit red flags an individual or a business. I have seen many instances of an individual being continuously audited over long periods of time because of an initial audit that occurred. This is also why it’s very important to have very good representation to make sure that the IRS is not unjustly targeting you or your business. An attorney can take steps such as contacting an expert advocate service or another area within the agency if you believe you are being targeted.
What Happens After An Audit Takes Place?
After an audit, you can dispute the case either with the IRS appeals office or by filing a petition with US Tax Court. However, if you agree with the audit outcome and you are unable to pay the balance in full, then you can set up an installment agreement with the IRS or an offer in compromise. Alternatively, you could apply for currently not collectible status. If you owe more than $50,000, then your case will be forwarded to the IRS collection unit and you will have to work with them in order to set up an installment agreement or submit an offer in compromise. Both of these options would require the taxpayer to submit documentation and to show their financial ability to pay.
Will Anyone Ever Know If I Am Being Audited?
The IRS may contact third parties during your audit process if it will assist them in determining if there is any tax liability due. The general rule is that the IRS may contact any person who can assist them in determining or correcting the balance. However, this procedure generally only occurs if the person or business being audited is not able to provide the information that the IRS is requesting. With the exception of certain circumstances that could jeopardize their investigation, the IRS must give the person who is being audited notice that they contacted a third party. In correction proceedings, if you already owe the IRS and you have not set up payment arrangements with them, the IRS will try to collect the balance from certain sources. They may do so by sending levy notices to the bank or to your employer.
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