It is very doubtful his winnings from 2002 are going to come up. Generally, the IRS can include returns filed within the last three years in an audit. If they identify a substantial error, they may add additional years. As you noted above, they usually don’t go back more than the last six years. And if that was the only income during the year, it would not be taxable anyway. You get a standard deduction each year so if there were no other income, the standard deduction was more than $1500 even 18 years ago. There would be no tax due.
I would not focus on or be concerned with that income, stay focused on the returns being audited.
IRS Audits For more information on what to expect and your rights during an audit, click that link. From that link:
Selection for an audit does not always suggest there’s a problem. The IRS uses several different methods:
- Random selection and computer screening - sometimes returns are selected based solely on a statistical formula. We compare your tax return against “norms” for similar returns. We develop these “norms” from audits of a statistically valid random sample of returns, as part of the National Research Program the IRS conducts. The IRS uses this program to update return selection information.
- Related examinations – we may select your returns when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
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