Most people think the IRS only looks at your taxes once.
You file your return. You get a refund (or you pay). And that’s it.
But here’s the part that surprises many taxpayers: the IRS can come back years later and review what you filed.
Why? How does that work? And when should you actually worry?
As someone who works daily with U.S. tax law and deals directly with the IRS, I’ve seen the confusion this causes. Many people believe audits are random or personal. They are not. There is a system behind everything.
Let’s break it down in simple terms.
What Is the IRS?
The IRS (Internal Revenue Service) is the federal tax agency of the United States. It is the government body responsible for collecting taxes and enforcing tax laws.
The IRS is part of the U.S. Department of the Treasury. That means it works under the federal government and follows the tax rules written by Congress.
In simple words:
- Congress writes tax laws.
- The Treasury oversees tax administration.
- The IRS applies and enforces those laws.
The rules the IRS follows are found in something called the Internal Revenue Code. That is the official federal tax law of the United States.
The IRS does not create tax laws. It enforces them.
What Does the IRS Actually Do?
Many people think the IRS only collects money. That’s not accurate.
The IRS has several key responsibilities:
- Processing tax returns
- Issuing refunds
- Collecting unpaid taxes
- Conducting audits
- Investigating tax fraud
- Applying penalties and interest
When you submit a tax return, the IRS does not manually check everything. Most returns are processed automatically using computer systems.
These systems compare your information with:
- W-2 forms from employers
- 1099 forms from banks or clients
- Investment income reports
- Cryptocurrency transaction data
If something does not match, the system flags it.
In my professional experience, many audits start not because someone did something illegal, but because numbers don’t match across documents.
How the IRS Processes Your Tax Return
Here’s what happens after you file:
- Your return enters the IRS system.
- Automated programs verify income and deductions.
- The system assigns a risk score.
- If the score is low, the return is processed.
- If the score is high, it may be reviewed further.
Most people never hear back from the IRS after filing. That’s normal.
But if something triggers a review, you may receive a letter. Not a phone call. Not a surprise visit. A letter.
And this is important: the IRS always contacts you by mail first.
What Triggers an IRS Audit?
This is one of the most common questions I get.
Audits are not random in most cases. They are based on patterns.
Common triggers include:
- Underreporting income
- Large deductions compared to income
- Repeated business losses
- High charitable contributions
- Self-employment income with low profit
- Cryptocurrency transactions not properly reported
For example, if you report $40,000 in income but claim $30,000 in business expenses, that creates a higher audit risk.
That doesn’t mean it’s illegal. It just means the system wants to verify it.
In practice, I’ve seen many cases where taxpayers panic when they receive an audit notice. But often, it’s simply a request for documentation.
An audit does not automatically mean fraud.
Why Can the IRS Audit You Years Later?
Now we reach the part most people don’t understand.
The IRS operates under something called a statute of limitations.
In general:
- The IRS has 3 years to audit a tax return from the date it was filed.
- If you underreport income by more than 25%, that period extends to 6 years.
- If fraud is involved, there is no time limit.
That means if you filed your 2021 tax return in April 2022, the IRS normally has until April 2025 to audit it.
But if you failed to report a large amount of income, that window could extend to 2028.
And if fraud is proven, the IRS can review the return at any time.
In my work with taxpayers, I’ve seen cases where people believed they were “safe” after one or two years. That’s not how it works. The legal window matters.
How Long Can the IRS Collect Unpaid Taxes?
This is different from audits.
If the IRS assesses a tax debt, it generally has 10 years to collect it.
This is called the collection statute expiration date (CSED).
During those 10 years, the IRS can:
- Place liens
- Garnish wages
- Levy bank accounts
- Offset future tax refunds
However, certain actions can pause or extend this period, such as filing bankruptcy or requesting installment agreements.
Many taxpayers don’t realize that ignoring IRS letters does not make the problem disappear. It usually makes it more expensive due to penalties and interest.
What Happens If the IRS Contacts You?
First, stay calm.
The IRS usually sends a notice explaining:
- What they believe is incorrect
- What amount is due (if any)
- What documents they need
There are different types of audits:
- Correspondence audit (by mail)
- Office audit (in person at an IRS office)
- Field audit (at your home or business)
Most audits are correspondence audits. They are handled by mail.
In my experience, the worst mistake people make is ignoring the notice.
The second worst mistake is responding without understanding the issue.
Sometimes the IRS is correct. Sometimes it’s not. But you must respond properly and within the deadline.
IRS vs State Tax Agencies
Many people confuse federal and state tax authorities.
The IRS handles federal taxes only.
Each state has its own tax agency for state income tax, sales tax, or other state-level taxes.
You can be audited by both.
And yes, sometimes one audit can trigger another.
For example, if the IRS adjusts your income, your state tax return may also need adjustment.
Is the IRS Part of the Government?
Yes. The IRS is part of the federal government.
More specifically, it operates under the U.S. Department of the Treasury.
It does not operate independently. It enforces laws created by Congress.
Understanding this is important because the IRS does not invent tax rules. It applies existing law.
Common Misconceptions About the IRS
Let’s clear up a few myths:
The IRS does not randomly target people for fun.
The IRS does not call you demanding gift cards.
The IRS does not show up without notice in most cases.
The IRS does not audit most taxpayers.
In reality, audit rates are relatively low for the average wage earner.
But risk increases with complexity.
Self-employed individuals, investors, and business owners generally face higher scrutiny because their returns are more complex.
Frequently Asked Questions About the IRS
What is the main purpose of the IRS?
The IRS collects federal taxes and enforces U.S. tax law.
Can the IRS audit anyone?
Yes, but audits are usually based on risk indicators.
How long can the IRS audit you?
Normally 3 years. In some cases 6 years. For fraud, no time limit.
How long can the IRS collect unpaid taxes?
Generally 10 years from the date of assessment.
What triggers an IRS audit?
Income mismatches, large deductions, repeated losses, and unusual patterns.
Final Thoughts
The IRS is not a mystery organization.
It is a federal tax authority that follows a system based on law, data, and risk analysis.
Most people will never face an audit.
But understanding how the IRS works gives you power.
From my experience working in U.S. taxation, the taxpayers who have the least trouble with the IRS are not the ones who earn the most money. They are the ones who keep records, report income correctly, and respond quickly to notices.
The IRS can review your return years later because the law allows it.
That’s not meant to scare you.
It’s meant to ensure compliance.
If you understand the rules, you reduce your risk.
And when you reduce your risk, you sleep better.