IRS Audits and the ‘Right to Finality’

Oct 26, 2021 | Personal Financial Planning, Tax News

IRS Audits

Taxpayers interacting with the IRS have the “right to finality.” This is an important principle for any taxpayer going through an audit. Taxpayers have the right to know when the IRS has finished the audit. This is one of 10 basic rights known collectively as the Taxpayer Bill of Rights.

Here’s what taxpayers in the process of an audit should know about their right to finality:

  • Taxpayers have the right to know:
    • • The maximum amount of time they have to challenge the IRS’s position.
    • • The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt.
    • • When the IRS has finished an audit.
  • The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.
  • There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has unlimited time to assess tax for that tax year.
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or in cases in which the IRS obtains court judgments.
  • There are circumstances in which the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer’s bankruptcy or there’s an ongoing collection-due process proceeding involving the taxpayer.
  • A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.
  • Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year if the agency finds it necessary. This could happen if, for example, a taxpayer files a fraudulent return.

A tax audit is not something you should face alone. Work with financial professionals to make sure you are aware of all your rights and responsibilities.

Have questions? We can help. Contact us at 703-218-3600 or click here. To review our personal financial planning articles, click hereTo learn more about MCB’s tax practice and our tax experts, click here. 

Subscribe to the MCB Blog and get all new MCB blog posts sent directly to your inbox.

©2021

Recent Posts

Archive Posts

Subscribe Now

Don’t miss a thing! Get all new MCB blog posts and insights sent directly to your inbox.
Loading
X