How often can I get audited? If my business gets audited, can the IRS audit my personal return?

There is no limit on how many times a taxpayer can be audited by the IRS. Typically, the IRS will initiate a second audit if they discover discrepancies during the first audit that gives them reason to believe that additional tax returns for other years may also contain inaccurate declarations of income or improper deductions. If the IRS continues to uncover information that makes them doubt the validity of previous income tax returns, the auditing can go on for an indefinite period of time.

Most taxpayers will survive a first audit and will not be subject to another audit for many years. Some taxpayers may not ever be audited again. However, if you falsified information on your tax returns or made the same errors many years in a row, the situation can get complicated. It is strongly recommended that taxpayers who suspect that they could be subject to multiple audits consult an experienced tax attorney who can advise you on how to approach the IRS.

At the conclusion of the first audit, the IRS will issue an audit report. You should carefully review the report with an attorney, if possible, and determine whether there is anything in the report that could trigger another audit of a prior year’s income tax return.

If you are a business owner and your business tax return gets audited, it is a strong possibility that the IRS could issue an audit notice for your personal return. Generally, after completing an audit of the business return, the IRS will pursue an audit of a personal income tax return if they discovered information during the audit of the business return that causes them to question the accuracy of the personal income tax return. A common scenario that causes the personal income tax returns of business owners to be audited following the audit of a business return, is when a business continues to show a loss in profits, but the owner continues to declare an annual income on the personal return that does not match accordingly.

Sometimes an audit is triggered merely due to simple mistakes made by taxpayers which can be easily corrected without severe penalties.

However, if you find yourself in a complicated situation where multiple audits can be triggered, you should work with an attorney who will help you alleviate or eliminate some of your tax burdens that are discovered during the audits.

Case Studies: Audits And Personal Returns

Case Study 1: The Indefinite Audit

Mr. and Mrs. Smith undergo an audit by the IRS, and discrepancies are discovered. As a result, the IRS decides to initiate further audits for other tax years due to suspicions of inaccurate income declarations and improper deductions. The auditing process can continue indefinitely if the IRS uncovers new information that raises doubts about previous tax returns.

Case Study 2: Surviving the First Audit

Mr. Johnson, is a taxpayer who successfully survives the first audit without triggering another audit for many years. While most taxpayers fall into this category, it is essential to avoid falsifying information or making consistent errors on tax returns, as it can complicate the situation. Seeking guidance from an experienced tax attorney is strongly recommended for taxpayers who anticipate multiple audits.

Case Study 3: The Business Owner’s Dilemma

When the business tax return of Mr. Thompson is audited, there is a significant possibility that the IRS will also audit his personal return. If the business audit reveals information that raises concerns about the accuracy of Mr. Thompson’s personal income tax return, the IRS may proceed with an audit of the personal return.

A common scenario leading to personal return audits is when a business shows consistent losses while the owner declares an income on their personal return that does not align.