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Originally Posted by SteveO123
The IRS recommends keeping returns and other tax documents for three years (or two years from when you paid the tax, whichever is later.) The IRS has a statute of limitations on conducting audits and it is limited to three years.
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The basic rule is that the IRS can audit for three years after you file, but there are many exceptions that give the IRS six years or longer. For example, the three years is doubled to six if you omitted more than 25% of your income. This 25% rule can apply to tax basis too.
The IRS also gets six years to audit if you omitted more than $5,000 of foreign income (say, interest on an overseas account).
The IRS has no time limit if you never file a return or file fraudulently.
Another rule is that the IRS can audit forever if you omit certain tax forms such as Form 5471 if you own part of a foreign corporation.
Once a tax assessment is made, the IRS collection statute is typically ten years.