[koolba]

I'll accept the baby step of a fixed historical period of time that they can audit your records. It's incredible nebulous.

For example here's the info on self-employed / business audits: https://www.irs.gov/businesses/small-businesses-self-employe...

> How far back can the IRS go to audit my return?

> Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years.

> The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly most audits will be of returns filed within the last two years.

> If an audit is not resolved, we may request extending the statute of limitations for assessment tax. The statute of limitations limits the time allowed to assess additional tax. It is generally three years after a return is due or was filed, whichever is later. There is also a statute of limitations for making refunds. Extending the statute gives you more time to provide further documentation to support your position; request an appeal if you do not agree with the audit results; or to claim a tax refund or credit. It also gives the IRS time to complete the audit and provides time to process the audit results.

> You don't have to agree to extend the statute of limitations date. However if you don't agree, the auditor will be forced to make a determination based upon the information provided.

So it's three years, but they sometimes go back six years. But they can also go back an arbitrary amount of years, so the three / six is completely meaningless.

[gamblor956]

It's not nebulous at all, it's incredibly fixed by law.

3 years (from the later of date of filing or the due date) to audit any return, for any reason. The 3 year statute of limitations applies to taxpayers seeking refunds by filing an amended return. Note that because the amended return is essentially a new return, the IRS gets 3 years to audit the amended return.

6 years (from the later of date of filing or the due date) to audit a return with a substantial undereporting of gross income or overstatement of deductions in credits resulting in a 25% or more understatement of taxable income

No deadline for returns that were not filed. Because obviously you can't audit a return that hasn't been filed.

There is also no deadline for fraudulent returns. Fraud is something more than the type of things that would trigger a 6-year audit window, like trying to avoid tax entirely, or taking advantage of a deduction or credit for which it's clear that the taxpayer wouldn't qualify for without some active effort to falsify their return. (Think Wesley Snipes.)

[ncallaway]

They can go extend the statute of limitations *if you agree*.

So, the statute of limitations seems… pretty ironclad. I don’t understand the issue you’re raising. If you don’t want them to look further back, don’t consent to extending the statute of limitations?

[koolba]

> They can go extend the statute of limitations if you agree.

The way that line is worded, the IRS can compel you to agree by rejecting your current return for lack of documentation.

For example, if you have a capital loss carry over from twenty years ago that you've been rolling over every year (applying the $3,000 deduction limit to ordinary income), they could compel you to allow being audited for the past twenty years or reject allowing you to apply it to the current year.

Since you never know how far back they can go, you effectively have to keep all your documentation forever or risk having them reject your current returns until you comply.

[gamblor956]

That's not correct, at all.

If you are claiming a deduction or credit, you are required by law to maintain the documentation proving that you qualify for that deduction.[1] If you can't provide that documentation, they can reject the deduction because there's no proof that you are actually entitled to that deduction. Your word that you super-duper remember having a capital loss 20 years ago that you can still deduct on your current return isn't good enough. They're not "compelling" you to allow your previous 20 years of returns to be audited, they're just upholding the law.

And quite frankly, they aren't going to audit anyone for 20 years of returns over $3000. They don't have the manpower for that.

[1] Once the SOL expires, you can discard that documentation. Tax advisors will generally tell you to keep your documentation for 7 years from when you receive it (because the 6 year window starts in the following year when you file the tax return including that information.)

[ncallaway]

If you’re claiming a capitol loss from 20 years ago in your tax return from 2 years ago, then yes, of course you need to retain that documentation.

You should retain *all* supporting evidence for your returns filed in the last 3 years. If that includes information from years before that, then you should be retaining supporting information for those filings.

There’s no ambiguity there.

[jonhohle]

My understanding is that contributions to retirement are similar. The origin of any contribution needs to be identifiable in perpetuity.