Different Types of IRS Audits

Many individuals do not know that there a different types of IRS audits, and it is important to know your rights and the type of audit you are facing to help the process go about smoother. The types of audits that individuals and businesses face are mostly determined by the amount of revenue that was reported and the amount of liability that may or may not be owed.

Request for Information (CP2000)

When you receive a CP2000 notice, know that it is not an audit but a request for information. The majority of the time, a CP2000 notice asks about income that was not reported on your income tax return such as bank interest, W-2 income, securities transactions and other income items which the IRS believes should have been reported on your tax return. You can contact an accountant in your area to help you understand why you received the CP2000 notice and how you can fix the situation.

IRS Correspondence Audit

The least serious of the IRS audits, where a letter is sent in the mail requesting further information about part of your tax return. A correspondence audit will be specific as to what the IRS is questioning on your original tax return; due to 3rd parties reporting different information or information not reflected on your return. Mainly the IRS will focus on issues regarding business deductions, un-reimbursed employee expenses and so one. As long as you have documentations to support your deductions, the audit can be quickly resolved.

IRS Office Audit

When an IRS office audit is required, you will receive a letter in the mail which will contain a list of items the IRS wants to look at. This type of audit requires an actual meeting between the IRS and the taxpayer (either a self-employed individual or small business operators/owners). An IRS office audit is more in depth since the auditors will want to investigate the “consequential” elements on your tax return that have either been flagged or bring up questions that require further supporting documentation. This is a more serious audit than a correspondence so it is advised for you to seek the help from a tax attorney or accountant.

IRS Field Audit

A field audit is the most serious and comprehensive type of audit you can receive in which the IRS visits you at your home or business office. Note that if the IRS is coming to you they are most definitely looking for something. This means that someone at the IRS has reviewed your tax return directly and has determined there are questions that must be answered. A field auditor will then visit your office to clarify if the deductions stated on your return are correctly stated. These field auditors are highly trained to detect fraud and potential criminal tax deficiencies so make sure to seek out the help of a tax attorney to help you out with this audit.