Types of IRS Audits


Types of IRS Audits

Getting picked for the IRS audit is enough to make anyone sweat. We all fear and dread that moment, don’t we? The real question is: is it because of the way we conceive the idea of getting audited or is it actually that bad? Well, the good news is that not all IRS audits are dreadful. Some are actually less severe than others.

Let’s take a look at different types of IRS audits and the preparation needed for each type:

1. Correspondence Audit

If by any chance you receive a correspondence audit letter, then we suggest you to stay calm. There is no need to panic. This is the least severe type of audit.

Correspondence audit letter is mostly sent by IRS requesting more information about certain deductions such as receipts to substantiate charitable deductions and copies of canceled checks. If your tax return is legitimate and you have the receipts and information to back up your claims, then correspondence audit is generally not an issue.

2. Office Audit

As compared to correspondence audit, office audit is more serious. The office audit letter identifies certain questionable items on the tax returns, and asks you to bring supporting documents to the IRS office. When called for the office audit, it is advisable to take all the supporting documents and any other additional records with you. Also, make sure your tax preparer, attorney and accountant go with you. They can defend your case better.

3. Field Audit

In this audit, the IRS team visits your home or office instead of you going to their office. This is the most severe level of audit and difficult to resolve. It is sometimes even called the ‘fishing expedition’. IRS agents on field audits are:

? Critical
? May visit your home/office several times, and ? May continuously probe you

In such a situation it is easy to lose your calm, but make sure that you don’t. If your deductions are accurately stated on your tax returns and you have adequate material to support your claims, then there is no reason to stress out. Let them carry out their audit to their satisfaction. However, make sure your tax preparer and attorney are always with you when the auditor comes over for inspection. Tax preparers are professional and experienced and they know exactly how to handle such situations.

Good Luck!