The general rule is three years. The IRS has three years from the date you filed your return to initiate an audit. If you filed your 2023 return on April 10, 2024, the IRS has until April 10, 2027 to open an examination for that year. If you filed late on October 5, 2024, the clock starts from that date instead. The filing date is what matters, not the original due date.

That window extends to six years if you understated your gross income by more than 25%. This is where a lot of trades and construction businesses get into trouble without realizing it. If your books were messy and income was miscategorized, or if cash jobs weren’t reported correctly, you may have triggered the longer period. The IRS doesn’t need to prove you did it on purpose. A 25% understatement is enough regardless of intent.

There are two situations where the statute of limitations disappears entirely. If you filed a fraudulent return, there is no time limit. And if you never filed a return for a given year, the IRS can come after you for it ten or twenty years later. There is no expiration on unfiled returns. This is why getting caught up on past-year filings matters even if you think the IRS hasn’t noticed yet.

For practical purposes, keep your business records for at least seven years. That covers the six-year window with some cushion. Bank statements, receipts, contracts, invoices, mileage logs, and anything else that supports what’s on your return. If the IRS questions a deduction and you can’t back it up, they disallow it and you owe the difference plus interest and penalties.

The biggest risk for trades businesses is not having documentation that matches what was filed. When books are incomplete or done after the fact from memory, numbers don’t always line up with bank records. Solid bookkeeping for trades businesses throughout the year creates a paper trail that holds up if the IRS ever looks back. It is far easier to maintain good records going forward than to reconstruct them years later under pressure.

If you do get an IRS notice or audit letter, don’t ignore it and don’t try to handle it alone. Responding incorrectly or providing too much information can make things worse. Tax audit support from someone who understands your business and knows how to communicate with the IRS can change the outcome significantly. The goal is to resolve it quickly, limit your exposure, and get back to running your business.