The 4 Types of IRS Audits to Expect

The 4 Types of IRS Audits to Expect

A tax audit is the last letter many taxpayers want to get from the IRS. It is not surprising as tax issues can have a devastating effect on one's finances. The receipt of an audit from the IRS should not be taken lightly.

Audits come in various forms, and some could be more alarming compared to others. Here are four types of audits that come from Uncle Sam.

1. Correspondence Audit

This is the most common IRS audit. Records have it that it makes up 75% of all IRS audits. It is a simple audit, and the taxpayer will typically get a letter in a mail. The message will request more information on a section of the tax return. For instance, Uncle Sam might need more information about a hardware expense and request receipts to support your deduction.

Also, in cases when the information you supplied does not match what Uncle Sam has, you will likely get CP2000. It is a notice from the IRS meant to adjust either an overpayment or underpayment of tax obligation. Your response to this should be either an agreement or disagreement with the announcement. Whatever answer you give, you need to support it with additional documents.

Do not ignore any notice from Uncle Sam requesting for additional info. Provided you have all supporting documents and prepared your tax yourself, and a corresponding audit is something you should handle. 

2. Office Audit

Should there be issues on your return that cannot be handled by a correspondence audit, an office is a right choice. There will usually be a letter in the mail requesting your presence at the office for the examination. 

This is a pretty detailed audit that might come with issues. Majorly, it affects issues like itemized deductions, rental income, business profit, and losses, etc. the office examination will involve questions about employment, lifestyle, and finances in a bid to determine other causes. 

You are better off giving accurate information to all requests from the IRS. Many at times, a taxpayer might provide a sincere answer that will trigger an audit expansion. Auditors are skilled people and know how to get the nervous taxpayer to provide excessive information. This is why you need an expert attorney to help with an audit.

3. Field Audit

This is the most detailed audit of the four audits. While the taxpayer will be invited for the correspondence and office audit, the IRS will visit your home or office for a field audit to check your records. 

The IRS has skilled agents that are expert at what they do. They will surely have certain things to see from your records. A particular record or item does not limit them. Considering a business audit, for instance, they will review financial records, explore the business facilities, and interview workers. The idea of a detailed interview is to understand the management structure and internal control. 

The audit could simply be a day to a week for an individual. There will be a review of financial records and interviews with the taxpayers, depending on how complex the account is. 

4) Taxpayer Compliance Measurement Program (TCMP) Audit

This is the final type of audit to update the IRS’ DIF scores. The IRS develops DIF scores from examining a massive group of intensive audits done every couple of years. With this audit, the IRS considers every item on the tax return. 

A typical audit consumes time because the individual must provide invoices, checks, contracts, bank details for items claimed on the audit. For a TCMP audit, the officials examine every line of the tax return. This means there must be enough documentation.

Whatever audit type you are slammed with, be sure to be calm and be organized. Be sure to have all essential documents like receipts, canceled checks, and other correspondence related to the items you are getting audited for. 

The Importance of Seeking Legal Advice

There is a huge chance that many people might provide excessive information to the IRS. This is not surprising as many are inexperienced with the IRS, and their auditors are experienced. This calls for an expert tax attorney to help in resolving tax issues. 

A tax attorney is an expert at giving out limited information to the auditor. With this, only a few information gets exposed.

Contact Member