If the IRS is thinking about auditing you, they currently have 3 years from the date your return is filed to decide. It’s called the Assessment Statute Expiration Date (ASED). There is an exception: in cases where the taxpayer omits 25% or more of his gross income, the IRS has 6 years to initiate an audit.
A number of lower courts have ruled one way or another on what constitutes a 25% income omission, and now the US Supreme Court has agreed to review the issue. Of course the IRS would like as much time as they can get, so they argue for a liberal interpretation. They argue that anything having the same effect as a 25% income omission (like an overstated tax basis) should result in a 3 year extension of the statute.
The case that the Supreme Court agreed to hear is Home Concrete & Supply v. U.S.. We need to keep an eye on this one. Currently it is not very common to see tax liabilities going back more than 10 years. The Collection Statute Expiration Date (CSED) on federal tax liabilities is 10 years; after that, the liability drops off the books. But the clock starts to run when the liability is assessed, so if the IRS waits 3 years to conduct an audit and assess the tax on your 2005 return, it would expire (at the very soonest) 13 years later — in 2019. This is assuming the return was filed on time (April 2006) and no other clock-stopping events have occurred in the interim.
If the Supreme Court rules in favor of the IRS, then we could start seeing more 16-year-old liabilities here and there.