The Smartest Ways to Handle an IRS Audit

Trung Tran

Expert Contributor
Last Updated: December 9, 2021

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An IRS audit is stressful, but there’s a silver lining. In most cases, an audit by the IRS should not worry you, because it doesn’t necessarily mean you’re in trouble. In many cases, the IRS has a few questions, and a few simple answers will suffice.

We’re here to help with your tax audit. This article will explore the kinds of audits you might face, as well as the best ways to handle them.

An Audit Does Not Mean You Are Guilty

Receiving a letter from the IRS does not indicate that you are guilty of tax evasion or any other crime. There are many outcomes to an audit. Yes, you may owe additional taxes, but that is just one possible outcome.

An audit may reveal that you overpaid your taxes. Over $1 billion was paid back to Americans who were audited in 2015. Furthermore, a fair number of audits end in no change whatsoever. Don’t assume the federal government is going to punish you. In many cases, the IRS just has a few extra questions.

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Different Types of IRS Audits

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Correspondence audit
- Usually, the IRS has no interest in actually meeting with you in-person. They are merely requesting additional documents to verify your tax return. In such a case, you are unlikely to ever meet an IRS agent.
Office audit
- Sometimes the IRS requires more in-depth answers for their questions, so you may be asked to come in for an office visit. A personal accountant or lawyer may be present but is generally not required.
In-field audit
- This is the rarest and most severe type of audit. The IRS does not conduct field visits on small or frivolous matters. The IRS will only come to you if they have grave concerns regarding the truthfulness or accuracy of your return.

Now that you know a little about the possible audit types, let’s look in-depth at each one, so you know the best ways to handle your audit, as well as who is available to assist you.

How to Handle a Correspondence Audit

The Correspondence Audit is the most common type of IRS audit and is the easiest to handle. A correspondence audit does not necessarily mean that you are in trouble. The IRS may be requesting additional proof of your tax return claims, or they may only need to clarify some necessary information (e.g., name, address).

If you get a request for information, the most crucial step is to retrieve all the documents they are requesting: tax returns, receipts, etc. Organize these documents and review them for accuracy and completeness. If you left something out, misinterpreted some information, filed something in the wrong category, or simply need to explain an action you took in more detail, identify exactly what action you need to take. Act promptly.

If necessary, a tax accountant can help. He or she can handle this entire process if you supply them with your documents. You (or your accountant) will need to provide the IRS’s requested documentation within 30 days. Later in this article, we’ll explore what happens if you don’t respond to an IRS audit.

How to Handle an Office Audit

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Office audits are another for an IRS audit and can be a little trickier than correspondence audits. If an IRS agent needs to meet with you, they probably need to cover multiple areas of your tax return. This is a good time to hire a tax accountant. Tax codes are notoriously complicated, so it’s best not to attempt an office visit with the IRS by yourself.

A tax accountant will prepare you for the meeting. They will tell you what to bring and what to say at the meeting. They are your legal representation, so the most important thing is honesty. Your accountant may ask difficult or personal questions about your finances, but it’s important to tell the truth.

A tax accountant may be able to handle the entire office visit for you, which means you can stay at home or your job while a professional works on your behalf. For this to be successful, your representation needs to know everything relevant about your finances.

How to Handle a Field Audit

Field audits are very personal form of an IRS audit and can feel invasive. The IRS tends to do field visits for wealthy individuals who are suspected of committing severe tax offenses. Bank deposits, withdrawals, gifts, etc. may be scrutinized. In these cases, the IRS is investigating tax fraud, which is a grave matter. It is crucial that you hire a tax professional for a field audit.

If you’re preparing for a field audit, grant your tax accountant the power of attorney. They will represent you during the audit and walk you through the process. Good tax accountants are in the best position to advocate on your behalf because they understand the intricacies of the tax code. They can also handle any extra visits with the IRS, saving you the stress and hassle.

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What Happens if You Don’t Act on an Audit

It’s not a good idea to ignore an audit or put off dealing with it. Each type of audit has different consequences if ignored.

If you ignore a correspondence audit
- If you do not respond within 30 days of the initial audit letter, you will receive a 90-day statutory notice of deficiency. This is your final chance to appeal the IRS’s penalties. After that, the IRS will begin collecting taxes you owe through your wages or other means.
If you ignore an office audit
- After the 30-day window, a 90-day letter will be sent. After that, the IRS will start to collect its dues.
If you ignore a field audit
- Every audit is serious, but this is the worst type of audit to ignore. The 90-day letter will be sent, and the IRS may restructure your reported income. They will likely increase how much you owe in taxes now and in the future.

Audits are serious business, but there’s always help. Tax professionals are your best bet for assistance, especially if you receive an office or field audit. If you’ve recently received an audit from the IRS, respond to it as soon as possible, and you will probably realize that it wasn’t as bad as you thought.

Trung Tran

Expert Contributor
Last Updated: December 9, 2021

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