With Tax Day right around the corner, you might be panicking as you try to get all your things in order. Even when you do everything right, you may still find yourselves surprised when, months later, the IRS audits you.
If you’re worried that this is something that might happen to you – or if it is something that is already happening – read on for some information that might be able to help you.
What Is an IRS Audit?
If you suddenly got a chill down your spine, you’re in good company. The idea of an IRS audit tends to scare even the most jaded of individuals. But what is it that makes it so scary?
The truth is that an IRS Audit can involve you having to field invasive and targeted questions from the IRS based on your financial history. You may be required to provide proof of purchase records for very specific items. However, an audit can also ask for you to provide proof of every line item that you’ve put on whichever tax return is in contention.
This is not to say that you’re going to be in trouble for making an innocent mistake, although the risk is there. This is why you must ensure that you’re doing your taxes as completely and correctly as possible. Getting dinged for even an innocent mistake can have long and far-reaching consequences that you may not be able to financially recover from.
Having said that, keeping your tax records for many years after you file can go a long way towards ensuring that you’ll be prepared if you should ever face an audit.
IRS Audit Statute of Limitations
When it comes to the term “statute of limitations,” this is a fancy term for “how long the IRS can chase after you for an audit.” Unfortunately, depending on the situation, the statute of limitations on an audit can go between three years, six years… and forever.
Working with a professional tax company that will help you to know your rights and what you’re about to deal with can be a large source of relief. If it comes out that you are free of the statute of limitations, this can be a load off your shoulders. This is because there are few things more relaxing than the idea of being free of an IRS audit.
If you are not under threat of an audit, you’ll find that this means that you are less likely to be in trouble with the IRS, meaning that your credit score won’t be impacted, and your financial history is in the clear.
Keep in mind the general rules of the following:
- For generic audits that are considered “standard,” the IRS can chase you for three years.
- For situations when you’re dealing with large understatements of income (which is when you claim that you have made way less than you have to try and avoid paying what you need to pay in taxes), the IRS can come after you for up to six years. Additionally, if you overstate how much you spent on the basis of a purchase, you are liable to be in trouble for up to six years.
- For all other types of audits, you are liable to be in danger forever. Keep that in mind before you attempt to get one over on the IRS.
Know When to Ask for Help
This blog is not meant to scare you or try to warn you away from doing your due diligence when it comes to annual taxes. You may find that this information may be hard to parse or that you have questions in the wake of it. If that seems to be the case, don’t worry! Here at Guardian Tax Law, we are a professional company that would love to help you on your journey.
All you have to do is reach out.
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