February 11, 2025
Filing your tax return starts the countdown for how long the IRS has to audit you. But when are you truly in the clear? In most cases, your risk of an audit lasts at least three years, but in some situations, the IRS can audit you for six years or even indefinitely.
3 Years or 6 Years?
The standard statute of limitations for an IRS audit is three years. However, this period extends to six years if:
✅ You omit more than 25% of your income from your tax return.
✅ You overstate the cost basis of an asset when selling it, causing an underreported gain of more than 25%.
✅ You fail to report more than $5,000 of foreign income, even if you disclosed your overseas accounts.
But there are even more serious situations where the IRS audit period never ends.
When Can the IRS Audit You Forever?
Some reporting mistakes can result in the IRS having unlimited time to audit you. This happens if you fail to file:
📌 Form 3520 – for reporting gifts or inheritances from foreign individuals.
📌 Form 8938 – if you have foreign assets that meet the reporting threshold.
If you miss these forms, the IRS audit clock never starts.
Form 5471: The Never-Ending Audit Risk
If you own shares in a foreign corporation, the IRS requires you to file Form 5471. Failing to submit this form carries a $10,000 penalty per missing form. But even worse, if you fail to file Form 5471, the IRS can keep your entire tax return open for audit indefinitely.
Until the missing form is submitted, the IRS can review and adjust your entire tax return with no expiration date.
How to Avoid IRS Audit Nightmares
✅ Ensure all required forms are filed, especially if you have foreign income or assets.
✅ Always sign your tax return – an unsigned return is not considered valid, meaning the IRS audit period never starts.
✅ Do not alter the perjury statement at the bottom of your return – doing so can invalidate the entire filing.
Tax compliance requires careful attention to detail. A single missing form can leave you exposed to an IRS audit forever. If you have international income, assets, or business interests, consulting a tax professional can help you avoid costly mistakes.
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