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By January 31, 2022No Comments

One of the worst letters you can get from the IRS is the letter that starts with the words “congratulations, your tax return has been selected for audit”.  I’m only kidding.  It doesn’t say congratulations.  You have the right to representation in the audit.  It is a rare instance that a taxpayer should go in alone.  There three basic types of audits.

Correspondence Audits

In this type of audit, they have specific items they need documentation on.  It is usually something deducted on Schedule A such as medical expenses, contributions, real estate taxes or mortgage interest expense.  This should be fairly simple and you might be able to handle it.

Office Audit

Just as it says, these are conducted in their office, usually with a tax compliance officer.  Again, they are looking for specific things and the letter notifying you of the audit will list them.  This audit usually takes approximately two hours.  These are usually for a basic return and possibly a small Schedule C (business) or Schedule E (rentals).

Field Audit

These are usually for business returns or individuals with a large or complicated business as part of their personal return.  The audit letter will be specific in what they want to see.  It will usually be conducted by a Revenue Agent.  It will usually take more than one day and if they have to come back again it will usually be because they need additional information or records to examine.  These can go on for months due to the workload and schedule of the Revenue Agent.  These audits are usually conducted in the office of your representative without you there.

All three of these types of audits should be taken very seriously.  When they aren’t that’s when they drag out and usually result in a large upward tax adjustment.