Types of IRS audits

The simplest audit and most common is a Correspondence Audit.  They account for about 75% of all IRS audits.  The IRS may send a 566 Letter when you made a mistake on your tax return such as a typo.  The IRS may also want you to send some additional documentation.  This is just a matter of you clarifying your mistake or sending in documentation typically about one item on your return.  After you have sent them the information they requested, the audit is usually resolved and closed. Another type of correspondence you may receive is a notice CP2000.  If the information that you entered on your tax return doesn’t match the records that the IRS has about you, a CP2000 notice will be sent proposing an adjustment.  You will be required to respond and let the IRS know whether you agree or disagree with the notice.  If you disagree with the adjustment, you will need to send supporting documentation within 30 days.  If you agree with the adjustment and owe money, you will need to send payment or request a payment plan.

Office audits are a little more complicated and dreaded.  Normally an office audit is more detailed and has more issues.  The office interview will include questions related to the issues being audited.  The audit may include more generalized questions in an attempt to find other causes for concern.  Consequently, a taxpayer should be very careful when answering questions to avoid expanding the audit.

A field audit is a more serious form of audit.  In this audit, the IRS visits the taxpayer at their home or place of business to examine records.  Field audits are normally conducted by IRS revenue agents, who are generally more skilled and knowledgeable than most other IRS auditors.  IRS revenue agents will typically specialize in a certain industry.

When the IRS visits a business, they may ask to see additional records.  The IRS doesn’t want to limit the audit to any particular item.  The audit could last anywhere from one day to several weeks, depending on the complexity.

Taxpayer Compliance Measurement Program Audits are the most extensive type of audit.  Every detail of your return must be substantiated including birth and marriage certificates.  The purpose of this audit is to provide data used to write the computer scoring program.

 

David Zubler is the author of three books and a philanthropist.  All of his proceeds from the books go to a charitable foundation he created for underprivileged children.  He is also the founder of Your Tax Care which provides tax education.