What are the Different Kinds of IRS Audits?

There are three different types of IRS audits, including correspondence audits, field audits, and office audits. The type of audit will depend on the information needed by the IRS. Correspondence audits are typically reserved for simple mistakes on the tax return, which can be easily corrected through mail correspondence with the IRS. Field audits and office audits are more intrusive to the taxpayer. The IRS usually employs field audits and office audits for businesses or individual taxpayers with higher income.

What is a Correspondence Audit?

A correspondence audit is an audit which is conducted entirely through mail. It is the lowest level of IRS audit and typically focuses on simple errors in the taxpayer’s return. In a correspondence audit, the taxpayer receives a letter from the IRS requesting information and the production of certain documentation. The letter most commonly associated with a correspondence audit is IRS Letter 566 (CG). In these letters, the IRS will ask questions about specific items on the tax return, such as income, expenses, and itemized deductions. The taxpayer should respond to the letter in a timely fashion.

What are IRS Requests for Information?

During an audit, the IRS will typically send written information requests to the taxpayer. They may issue a series of these written requests. The IRS also has the power to send written requests or summonses to third parties associated with the taxpayer, including banks, vendors, clients, and business associates.

The IRS typically request the following information during audits: copies of tax returns for previous tax years, copies of business income and expenses, and tax returns of related taxpayers. Sometimes, the IRS conducts bank deposit analysis, and may request bank records, deposit slips, and the front and back of checks deposited.

In conducting the audit, the IRS will request to see receipts, invoices, records, credit card statements, cancelled checks, and other documents. During this process, the IRS checks whether you stated income and expenses accurately on your income tax return. If the IRS is not satisfied with the information you provide, or if certain items do not reconcile, they may decide to expand the categories being audited.

How Should I Respond to a Correspondence Audit Letter?

The correspondence audit letter will contain a deadline within which the taxpayer must respond. If a taxpayer is unable to meet the deadline, he or she can call the telephone number on the letter to explain the situation or request additional time to perform.

If the letter asks you to send documentation in support of your tax return, you should attach photocopies of the requested documentations. Do not send the original copies of the documents.

If the IRS accepts your documentation, you will receive a letter stating that the IRS has accepted your return as filed. If the IRS does not accept your documentation, you will receive a letter stating any changes to your tax return being proposed by the IRS.

If you are worried that the audit and information requests may lead the IRS to discover bigger and more problematic discrepancies on either the tax year in question or other tax years, then you should contact an experienced tax attorney for guidance.

The Tax Lawyer – William D Hartsock offers free consultations with the full benefit of attorney client privilege. Call today to schedule a consultation.


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