Types of Tax Audits and How to Prepare for Them


Receiving correspondence from the IRS is always a little unnerving, especially if it’s for an audit. Fortunately, most tax audits are simple and straightforward, requiring only minimal effort before they’re resolved. More involved audits, however, can be incredibly time-consuming, particularly if you’re not prepared.

In this post, we’ll go over the main types of tax audits and how to best prepare for them.

1. Correspondence Audits

The most common type of IRS audit is a correspondence audit. This type of audit is simply a request for additional information about some aspect of your tax return, such as evidence of specific deductible expenses.

When a Correspondence Audit Might Occur

Correspondence audits typically occur when the IRS wants to make sure the information on your tax return is correct. For instance, if there is a mathematical error on your return or if something looks suspicious, they’ll send a letter requesting more information or evidence.

Preparing for a Correspondence Audit

To prepare for a correspondence audit, it’s best to be proactive. Have all necessary receipts and documentation filed away and organized. All you really need to do is verify that the information you included was correct and fix any mistakes that may have been made.

2. Office Audits

In cases where an issue is a little too complex to handle through correspondence only, the IRS may request an office audit. In an office audit, you’ll be asked to meet with an auditor at an IRS office. These audits usually only take one visit, after which they’re concluded. However, additional visits may be necessary if the auditor feels more information is needed.

When an Office Audit Might Occur

An office audit typically occurs because of questions surrounding itemized deductions, business profits/losses, or rental income/expenses. Large or unusual amounts in these areas may be enough to trigger an audit.

Preparing for an Office Audit

In an office audit, you’ll need to be careful how you answer the auditor’s questions since a single misstep could lead to them expanding the audit. For this reason, it’s a good idea to have a tax attorney on your side in addition to collecting all necessary information.

3. Field Audits

The most comprehensive form of audit is a field audit, in which an auditor will visit your home or business to look at your records and interview you. If they’re auditing your business, they may also talk to your employees, examine your accounting procedures, tour your facility, etc. These audits can be lengthy, and they are by far the most intrusive.

When a Field Audit Might Occur

A field audit may be triggered by particularly unusual amounts involving complex aspects of your tax return. They may also occur at random, such as with TCMP or NRP audits. These audits are intended to give the IRS information about common areas of noncompliance or to gather data for their tax analysis software.

Preparing for a Field Audit

Field audits require careful preparation with all records relevant to your taxes organized and kept on file. In addition, it’s best to hire a tax attorney in order to prevent the audit from being expanded further.

Passing an IRS Audit

Most audits don’t require too much effort, but if the IRS asks you to meet with them face-to-face, it’s best to have an attorney on your side. Hiring a tax attorney can keep the process short while potentially minimizing your tax burden.

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