Final answer:
For an incorrectly filed tax return, the IRS typically has three years to conduct an audit but can extend to six years for substantial errors or have no limit in the case of fraud or unfiled returns. Tax refunds are limited to within three years from filing or two years from the tax payment.
Step-by-step explanation:
The general statute of limitations for an incorrectly filed tax return typically depends on the nature of the error. If there is a substantial understatement of income, the Internal Revenue Service (IRS) usually has up to six years to challenge the tax return.
However, if a return is fraudulent or if no return has been filed at all, there might be no statute of limitations, allowing the IRS to audit at any time. For most other mistakes, the statute of limitations is three years from the date the return was originally due or the date it was filed, whichever is later.
Tax refunds, credits, or offsets are also usually limited to three years from the date the original return was filed or two years from the date the tax was paid, whichever is later.