How Far Back Can The Irs Audit
Q.By law, can the IRS audit prior tax years? If yes, how far back can they go? What would trigger them to go back and look on prior year? If I just realized that I made a mistake on a prior year tax return, am I supposed to call them and fess up? Thanks.
A.They can go back 3 years unless they have evidence that you understated your income by more than 20%. There are some depreciation issues that may allow them to go back further. You are supposed to go back and amend a return that you realize is incorrect. Most tax professionals would advise you to forget about it. If the IRS finds it, they'll usually fix it for you, though usually incorrectly. If there is a lot of money at stake &/or you are having trouble sleeping at night, you can file a 1040X and fix the mistake now. If it has been more than 3 years, the statute of limitations should protect you. If the mistake was for 1996 or later, file an amended return on Form 1040X. Pay any additional tax due with the 1040X. They'll bill you for the interest. (If they owe you a refund, they'll pay interest on it.) If the mistake was for 1995 or before, chances are very good that the period for them to challenge your return has expired, if you filed on time
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