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The IRS’s statute of limitations for a tax audit in Washington

On Behalf of | Dec 28, 2022 | Tax Debt |

A tax audit is one of the few legal realities that most people in Washington want to avoid at all costs. The process is often time-consuming, potentially costly and can lead to serious financial and legal repercussions. The good thing is there’s a limit to how far the IRS can look back at your business and personal finances. This is called the statute of limitations, and it’s a critical protection for taxpayers.

Understanding an IRS audit

An IRS audit is an examination of your past or current financial records to check that you’re complying with the applicable tax law. This can involve reviewing detailed documentation, such as receipts and bank statements, as well as interviews with the taxpayer and other people who may have information relevant to the audit. The goal of the IRS is to ensure that taxpayers are paying their fair share in taxes and not attempting to evade taxes.

The statute of limitations for an audit in Washington

The statute of limitations for an IRS audit is a set amount of time during which the IRS can initiate audits or assess additional taxes on a taxpayer’s return. This period begins when you file your tax return and typically lasts three years from then.

If the three-year period expires before the IRS has conducted an audit, they can no longer initiate one. This means that you are no longer liable for any additional taxes due as a result of the audit, and the court will likely forgive any outstanding balances.

Exceptions to the statute of limitations on IRS audit

There are circumstances where the statute of limitations does not apply, such as when the taxpayer has significantly misrepresented or omitted facts on their tax return. In this case, the IRS may continue to audit a taxpayer beyond the three-year period.

Additionally, if you have filed an amendment to your original return, the statute of limitations will reset and begin again from the date of filing. This means that while you may have complied for three years prior, now you could be subject to an audit at any time.

As mentioned, an audit normally occurs when the IRS suspects you have violated tax laws. Meaning you can prevent an audit by ensuring you adhere to all applicable tax laws and filing accurate returns. However, if an audit is imminent, you can avoid repercussions by complying with the IRS’s requests and providing documents in a timely fashion.