IRS audits

An IRS audit is an examination of your tax account and financial information to ensure that figures are reported correctly and that you are adhering to tax laws. As tax returns are filed, they are compared to the average figures for similar taxpayers. If your figures appear elevated or show anomalies, your return is placed in a pool with others and may be randomly selected for further review by an experienced auditor. After this review, the IRS may accept your return as filed, or it may be forwarded to an examination group for a more detailed analysis. 

A correspondence audit is the least severe and most common type of IRS audit, conducted entirely through mail. It typically focuses on minor errors or discrepancies in a tax return.

The taxpayer will receive an IRS Letter 566 (CG) or a similar notice requesting documentation related to specific items, such as income, deductions, or expenses. The taxpayer should respond promptly with the requested information to resolve the matter efficiently.

If the IRS has more questions about a return, it may request an in-person meeting at an IRS office. This type of audit is more serious than a correspondence audit and may involve a detailed review of multiple aspects of a tax return. A Revenue Agent will provide a list of documentation required for review. At the end of the audit, the taxpayer will receive an audit report detailing any proposed changes. If the taxpayer disagrees with the findings, they have the right to dispute the adjustments through an appeal.

A field audit is the most comprehensive and serious type of IRS audit, though it is also the least common. The IRS auditor visits the taxpayer’s home, place of business, or tax professional’s office to conduct a detailed examination of financial records. The IRS typically conducts a field audit when there is a significant issue requiring further investigation, often involving high-income taxpayers or complex business returns. Due to the seriousness of this type of audit, taxpayers should have a knowledgeable Enrolled Agent (EA), CPA, or tax attorney present for representation.

The IRS conducts random audits as part of the Taxpayer Compliance Measurement Program (TCMP). These audits are used for research purposes to update IRS compliance standards. The IRS is not looking for anything specific but will examine every line item on a return, requiring the taxpayer to provide full documentation. These audits are rare but very detailed. If no red flags are found, no further action is taken. If discrepancies arise, the IRS may request additional information or conduct a deeper audit.

Once any of these audits are completed, the IRS will mail the taxpayer an Examination Report detailing the audit findings and any necessary tax adjustments. The taxpayer has 30 days to accept or dispute the findings.

If the taxpayer agrees, they may need to make adjustments, such as paying additional taxes or penalties. If the taxpayer disagrees, they can take the following steps:

• Request a managerial review
• File an appeal with the IRS Independent Office of Appeals
• File a petition with the U.S. Tax Court if necessary

• Respond promptly to any IRS notices.
• Provide only the information requested—no more, no less.
• Keep organized records of receipts, bank statements, and relevant documents.
• Seek professional assistance from an Enrolled Agent (EA), CPA, or tax attorney for complex cases.

Understanding these audit types and their procedures can help you navigate an IRS audit with confidence; however, taxpayers should not attempt to handle an audit alone. If you need assistance with an audit or tax representation, 📞Contact us today at 720-988-0688 for professional guidance.