IRS Audits – The Various Types and Procedures
Receiving an IRS audit notice can be stressful, but an audit does not automatically mean you made a mistake or that you will owe additional taxes. An audit is the IRS process of reviewing information reported on a tax return to determine whether it is accurate and properly supported.
There are several types of IRS audits. The type of audit you receive depends on the issues being reviewed and the complexity of your tax situation.
Correspondence Audits
A correspondence audit is handled entirely through written communication with an IRS office (often called an IRS Campus or Service Center). The IRS will send a letter identifying specific items on your return that require additional documentation, such as deductions, credits, or income items.
You will be asked to provide supporting records, such as receipts, statements, or other documentation. After reviewing your response, the IRS will either accept your return as filed or propose changes. If you disagree with proposed changes, you generally have the right to appeal, but strict deadlines apply.
Office Audits
An office audit requires you to meet with an IRS examiner at a local IRS office. The IRS will send an appointment letter explaining what items are being reviewed and identifying the records you should bring.
Common requests may include bank statements, mileage records, invoices, receipts, or other supporting documents. Providing complete information at the initial meeting can often help make the process more efficient.
After the audit, the IRS examiner will provide the results. If changes are proposed, you may agree with the findings or challenge them through the IRS Appeals process.
Small Business/Self-Employed (SB/SE) Audits
SB/SE audits are generally more extensive examinations conducted by an IRS Revenue Agent. These audits often involve self-employed individuals, independent contractors, and small businesses.
These audits are typically conducted through in-person meetings and may take place at your business, your representative’s office, or another appropriate location. Because these examinations can involve detailed reviews of income, expenses, and business operations, they often require careful preparation and organization.
If the IRS proposes changes, you have the opportunity to respond and, if necessary, appeal the proposed adjustments.
Large Business and International (LB&I) Audits
Large Business and International (LB&I) audits generally involve larger businesses and more complex tax issues. These examinations may include teams of IRS Revenue Agents and specialists with expertise in areas such as accounting, employment tax, international transactions, and technology.
Regardless of the type of audit, professional representation can be valuable. What you say to an IRS examiner and the documents you provide can significantly affect the direction and scope of an examination. A knowledgeable representative can help ensure that responses are complete, relevant, and focused on the issues under review.
My background provides a unique perspective in IRS audit matters. As a former Internal Revenue Agent, Field Examination Group Manager and Associate Chief of Appeals with the IRS, I understand how audit findings are developed, how proposed adjustments are evaluated, and what issues are important when preparing a case for appeal. I use that experience to help clients navigate audits, protect their rights, and pursue the best possible resolution.
If you have received an IRS audit notice, I offer a confidential consultation to discuss your situation, explain your options, and help you determine the best way to proceed.