How To Approach different types of IRS Audits

What is an IRS Audit?

An IRS audit is simply a review of your tax return to determine if the information is reported correctly. Tax returns are audited for audit for a multitude of reasons, including random selection. Regardless of the reason, it is important to remember that the IRS is not accusing you of committing a crime. They are simply double-checking the numbers on your tax return to determine the validity of your tax return. During an audit, a taxpayer will be expected to prove that they properly reported their income and were entitled to all the deductions claimed.

Identifying why your return was selected for audit often determines the best approach to solving the issue. There are numerous audit triggers that could lead to different types of audits. The approach to quickly resolving the audit varies based off the type of audit.

Different Types of Audits

Correspondence Audit: This is the most basic type of audit issued by the IRS and thus is the most common. The IRS intends for these to be resolved quickly, making them a less invasive process. Correspondence audits are limited in scope and are triggered when there is a minor error suspected on your tax return. They are normally conducted by mail and may be resolved through review of relevant source documents. Although correspondence audits are aimed at high volume issues seen among common errors across all taxpayers, the audit category could involve complex tax issues that taxpayers may not understand. That is why it is always important to contact a tax specialist to ensure the correspondence audit can be solved efficiently and effectively.

Office Audit: These types of audits are reserved for more complicated tax issues that cannot be solved through the mail. An examination of a taxpayer’s returns and records will take place at the auditor’s office. The IRS will usually request that the taxpayer bring specific documentation to the auditor’s office to substantiate the numbers on the return. An office audit is more comprehensive and will involve multiple line items on the return. At the end of the audit the taxpayer will be given an audit report with proposed changes to the tax return. Going into an office audit can be intimidating, but having an experienced tax professional will help alleviate the burden. Understanding which documents to bring into an audit and which line items to focus on can lead to better results and even expedite the audit process.

Field Audit: This is by far the most detailed and notorious kind of IRS audit. Field audits are conducted by IRS Revenue Agents who are more skilled and knowledgeable than other auditors. First, a Field Audit letter is sent to the taxpayer containing a list of requested documents. The agents will then meet with the taxpayer to conduct a face-to-face audit. These audits are serious and can be highly intrusive. When dealing with a field audit, it is crucial to have a tax attorney present throughout the process. A tax attorney will ensure the taxpayer’s rights to a fair audit is respected. Additionally, those who are not experienced in the complexities of IRS Field Audits can easily find themselves with an increasing audit scope, including the opening of audits for additional tax years. A tax attorney will make sure only the necessary documentation is disclosed and discussed to limit the scope of the audit.

Each type of IRS audit requires a unique and calculated approach to achieve the most desirable result. Hiring a tax attorney who has expertise in every type of audit can help relieve the stress that comes with being audited. No matter what type of audit you are facing, a tax attorney at Dallo Law Group can help.

Written By: Jacob Silver and Brandon Burger