Normally, you only need to concern yourself with being subject to the last 3 years’ worth of tax returns. Sometimes the IRS is allowed to audit 6 years’ worth, but that’s usually it. But as Forbes recently pointed out, there are some mistakes you can make that will open yourself up to an unlimited number of years that the IRS can go back for an audit. Here’s what to avoid.
- Failing to sign your return — If you don’t sign your return, it’s not considered valid.
- Changing the penalties or perjury language — You aren’t allowed to make changes to the existing language of IRS forms.
- Missing a filing for an offshore account — The IRS is particularly sensitive to offshore accounts, and even just missing one filling will open you up to unlimited audits.
- Failing to file all the required forms if you own a share in a foreign company — This is a big no-no with the IRS. Failing to file these forms doesn’t just mean unlimited audits. It also means penalties at a typical $10,000 per form. The penalties apply even if no tax is due on the form. The most significant of these forms is the 5471. You can receive additional penalties if the form is filed late, incomplete, or inaccurate. And the IRS can make any adjustments to your entire tax return until Form 5471 is filed.
The moral of this story is to double- and triple-check for accuracy, and be sure you’re filing every form you need to, when it’s due.