Receiving an IRS audit notice can be overwhelming, but knowing the different types of audits and their processes can help you manage the situation effectively. However, handling an audit is not something that you should face alone—having professional support can greatly improve the outcome and reduce stress on business owners.

Below, we outline the three primary types of IRS audits for the 2024 tax reporting year: Correspondence Audits, Office Audits, and Field Audits, along with reasons why professional assistance is invaluable.

Correspondence Audits: A Mail-Based Review

What to Expect:

A Correspondence Audit is the most common and least intrusive type of IRS review. Conducted entirely through mail, it typically targets specific aspects of your tax return, such as discrepancies in deductions, credits, or income. The IRS will send you a notice requesting supporting documentation. The IRS may escalate a correspondence audit to an Office Audit or Field Audit if things do not go well for the taxpayer, or if progress in providing required documents and other information goes too slowly.

Steps in the Process:

  • Receiving Notification:

    The IRS sends a letter specifying the items they need to examine.

  • Gathering Evidence:

    You will need to collect relevant records such as receipts, bank statements, or other supporting documents.

  • Submitting Your Response:

    Send the requested documents to the IRS by the stated deadline.

  • IRS Review:

    The IRS evaluates your submission and determines whether any changes are needed. Fortunately or unfortunately, the IRS response may take many months as this is not a high IRS priority, and many thousands of workers have been laid off.

  • Final Resolution:

    You will receive an official notice indicating any adjustments to your tax obligation. This can be appealed, however penalties and interest will accrue in the meantime if the IRS prevails.

Why Expert Assistance is Key:

Even though a Correspondence Audit may seem simple, errors or omissions can lead to additional scrutiny or unfavorable results. A tax professional can help you organize your documentation, ensure accuracy in your response, and correspond with the IRS on your behalf, reducing the risk of complications. Also it just looks better to have accounting and tax professionals representing you!

Office Audits: In-Person Examination at an IRS Location

What Happens During an Office Audit:

An Office Audit is more comprehensive than a Correspondence Audit and requires an in-person meeting with an IRS auditor at a designated IRS office (and yes, the location may be far away). These audits typically focus on more complex tax issues and may require detailed discussions about your financial records.

Steps in the Process:

  • Receiving the Notification:

    The IRS requests that you schedule an appointment at a local office.

  • Preparing Your Documentation:

    Gather all relevant financial records, including receipts, invoices, and bank statements.

  • Attending the Meeting:

    The IRS auditor will review your records, ask questions, and assess your tax return in detail.

  • Providing Additional Information:

    If further documentation is needed, you may have to supply more records or explanations. This is likely; it is unlikely that all will be resolved during the first meeting.

  • Receiving the IRS Report:

    The IRS will provide a final assessment outlining any changes to your tax liability including penalties and interest.  Again, the IRS decision may be appealed however penalties and interest will accrue if the IRS prevails.

Why Professional Representation Matters:

Office Audits can be daunting, but proper preparation and representation can ease the process. A tax expert can ensure that your documents are complete, help you understand the auditor’s questions, and should attend the audit with you to help negotiate a fair resolution. A tax pro on your side greatly reduces the IRS intimidation factor too, and can explain the reasoning behind IRS questions.

Field Audits: The Most Comprehensive IRS Examination

Understanding a Field Audit:

A Field Audit is the most extensive type of IRS audit, where an IRS agent visits your home, business, or tax professional’s office to conduct a thorough review of your financial records. This type of audit typically applies to more complex cases or when the IRS suspects major discrepancies. Field audits may ultimately take months or even years to resolve, and may be appealed.

Steps in the Process:

  • Receiving the Notification:

    The IRS informs you of the upcoming visit and provides details about the audit. This may be rescheduled if inconvenient.

  • Preparing for the Examination:

    Gather all necessary documents, such as financial statements, receipts, and records of transactions. Ask about allowable formats such as spreadsheets and pdf documents supplied on USB drives.  Don’t assume anything since the IRS is very careful about this.

  • Host the IRS Agent:

    The auditor will visit your location and conduct an in-depth review of your tax situation. Take this very seriously and be prepared!

  • Providing Additional Documentation:

    Further information may be required both during and after the visit. This is very likely.

  • Receiving the IRS Findings:

    The IRS issues a report summarizing any changes to your tax return and liability. The report is normally in the form of a letter issued months later and can usually be accessed in your online IRS account and by U.S. mail. 

In all cases, the IRS is usually willing to work out payment plans with taxpayers; just ask and they will explain all of your options.

Why You Need a Tax Professional:

A Field Audit can be the most stressful type of IRS audit, and having a professional by your side is critical for the best outcome, and to reduce stress. A tax expert can ensure you are well-prepared, handle discussions with the IRS agent, witness the events and work to secure the best possible outcome for you.

Expert Help Makes a Difference

Understanding the various IRS audits is crucial, but successfully handling one requires specialized knowledge and experience. A tax professional can guide you through the process, helping you present a well-documented case while minimizing potential risks.

Facing an IRS audit can be challenging, but you don’t have to go through it alone. Let our team handle the complexities for you. We have CPA’s with great experience in dealing with the IRS, and IRS Enrolled Agents. The IRS knows that experts with these credentials value their special relationships with tax authorities and will not take liberties.  Contact us today for expert assistance and peace of mind throughout the audit process.