You just received a notice from the IRS that you have been selected for an audit. Don’t panic. There are many reasons for an IRS audit that we will cover in this article to help clarify your situation. If you do find yourself in a situation where you need help with an IRS audit, contact us for help. We can connect you with a tax professional.
An IRS audit is a review of an individual’s or a business’s financial records and tax returns to ensure compliance with tax laws and regulations. While audits can be intimidating, it’s important to remember that not all tax returns are audited, and being selected for an audit doesn’t necessarily mean you have done something wrong. Let’s get into the types of IRS audits and the audit process.
Types of IRS Audits
There are three main types of IRS audits: Correspondence Audit, Office Audit, and Field Audit.
This is the least invasive type of audit and typically involves the IRS sending a letter, typically referred to as a “Notice of Audit,” requesting additional information or clarification on certain items on your tax return. You may need to provide supporting documents such as receipts, bank statements, or other financial records to verify your deductions or credits. The notice is typically in the form of an IRS Letter 566.
During a correspondence audit, the IRS will specify the items being audited, such as deductions, credits, or other claimed tax benefits, and will request documentation to support those items. You will need to provide accurate and complete documentation to the IRS within the specified timeframe, typically 30 days, to address the audit. Once the IRS reviews the documentation and determines that the items have been accurately reported, the audit is usually resolved with no changes to your tax return.
An office audit, as the name suggests, requires you to appear in person at an IRS office to provide documentation and answer questions about your tax return. Office audits are typically more complex than correspondence audits and may involve multiple issues or larger tax liabilities. You will receive a written notice from the IRS specifying the items being audited and the documents you need to bring to the office for review.
During an office audit, you will meet with an IRS examiner who will ask you questions about your tax return and may request additional documentation or explanations. It’s important to be prepared and bring all relevant documentation to the office audit, as failure to provide adequate documentation may result in changes to your tax return and potential penalties. Fortunately, you are able to bring an lawyer to an IRS tax audit. Complete the free consultation form if you have received a notice for an office audit and want to consult with a tax lawyer.
A field audit is the most comprehensive and complex type of IRS audit, where an IRS examiner conducts the audit at your home, business, or your tax professional’s office. Field audits are typically conducted for high-income earners, businesses, or taxpayers with complex tax issues. The IRS will contact you to schedule an appointment for the field audit and provide instructions on the documents you need to have available for review.
During a field audit, the IRS examiner will conduct a thorough review of your tax return and financial records, and may ask you questions about your tax return, business operations, or other relevant information. Field audits can be time-consuming and require careful preparation and organization of all relevant documents and records. If you have been notified of an IRS field audit, it’s important to consult with a tax attorney or tax representative so you can be prepared for the audit.
It’s important to note that not all audits result in changes or penalties. Many audits are resolved with no changes to the tax return, and some may even result in a refund if the IRS determines that you overpaid your taxes. However, it’s crucial to respond promptly and provide accurate and complete documentation during an audit to avoid potential penalties or further scrutiny from the IRS. If you’re unsure about how to handle an IRS audit, it’s recommended to seek professional tax advice from a qualified tax professional.