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Four types of IRS audits

On Behalf of | Sep 26, 2022 | Internal Revenue Service

 

The Internal Revenue Service conducts different types of audits. This means that individuals often face different examinations when flagged for suspicious activity. Below, we take a comprehensive look at the four primary types of audits:

Correspondence audits

This type of audit usually covers one return year and is conducted by phone or mail by the IRS. Usually, it is conducted on nonprofits and charities with the aim of gaining additional information about specific issues on their tax return. Questions revolve around a refund, deductions, or business expenses.

Although considered the lowest level of IRS auditing, correspondence audits could potentially become complex. Penalties for fraud and errors after this audit includes liens on property, payment of additional taxes, and fines. However, if everything is straightforward and the information requested satisfies the inquiry, the issue is closed with a confirmation letter from the IRS.

Office audits

The second most common IRS audit type is office audits. Although it might seem nerve-wracking being asked to go down to your local IRS field office, it usually involves similar questions to those in corresponding audits.

The IRS letter will include the documents you need to bring during your visit. Luckily, these audits often close quickly because the work is done directly with an appointed IRS auditor. You don’t have to go through the hassle of exchanging documents via mail.

Field audits

Conducted at your place of business or home, field audits are handled by an experienced IRS agent. Often, they address potential issues revolving around complex financial documents of high-wealth companies and individuals. Taxpayers that have complications with their tax returns can also expect a field audit.

Similar to office audits, you will work directly with an agent. The agent will typically require clarifications on different areas of your finances and documentation. These audits can take a long time to close, and most last up to a year.

Taxpayer compliance measurement program

Although this type of IRS audit is uncommon, it is much more thorough than the rest. For starters, an IRS agent goes through every line on your tax return. It will entail lengthy examinations because every detail will be scrutinized.

During the taxpayer compliance measurement program, the selected organizations and individuals are purportedly random. Therefore, your tax returns could potentially have no errors or issues. However, it will stretch years to complete the audit due to the lengthy, detailed cross-examination.

 

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