Tax Audit Guides

The Types Of IRS Audit

You did everything by the rulebook. You made sure to submit your income tax return before the deadline. Everything was reported correctly, and you are expecting a tax refund. Then, you get a letter in the mail from the Internal Revenue Service, and expected good news turns into bad news.

The letter states that the agency selected you for an audit. Now, what can you expect from an IRS Audit?

tax audit is a closer examination of your tax return by the Internal Revenue Service to confirm that your income and deductions are accurate. It doesn’t always mean that you have done something wrong—rather, the IRS just wants to take a closer look at your return.

Tax audits are performed by the IRS in a few different ways. Here’s a closer look at the different types of tax audits.

What Are the Types of Tax Audit?

When the IRS is auditing you, you’ll receive a notice of the audit in the mail. There are three types of audits the IRS may perform: correspondence, field, and office.

  • A correspondence audit means that the IRS needs additional documentation from you, and you will be asked to mail it in. This is the most common type of audit, and you will not have to meet with an IRS agent.
  • Field audits are generally done on businesses. In a field audit, an IRS agent will come to your business or home to look at your records.
  • An office audit is just like it sounds. You will have to go to an IRS office to meet with an agent.

You should prepare for an audit by gathering a copy of your tax return, any documentation you have that supports your return, and any additional information that was requested in the letter you received notifying you of the audit. If you are meeting with an auditor, make copies that you can leave with them.

You may also want to have representation for your audit. Tax audits can take a lot of time and cause a lot of stress. The team at Levy and Associates can help you with your audit defense. We have years of experience in dealing with the IRS and are qualified to help you out in any type of tax audit. And, if you end up owing back taxes, we can help you with negotiating a tax resolution.

How Long Can You be Audited by the IRS?

There is a time limit, otherwise known as the statute of limitations, within which the IRS can legally audit past returns. Generally, the Internal Revenue Service may audit any return within the last three years.

However, if the agency identifies “a substantial error,” the statute of limitations may be extended. Regardless, the IRS usually doesn’t audit tax returns longer than six years from their original filing date.

Therefore, if you file a tax return before the April 15 deadline, you have three years from the filing date to receive a closer examination by the IRS, unless tax fraud or substantial errors are suspected. In most cases, the IRS attempts to wrap up an audit within the first year, as its training guide calls upon agents to strictly adhere to the guidelines.

As previously mentioned, the statute of limitations may be extended to six years if a large amount of income appears unreported. The type of audit will also determine how long it will take to get your return settled with the U.S. government:

  • Correspondence or mail audits usually notify taxpayers within seven months of filing; however, the law states the IRS has up to three years to send a notice. Mail audits are also the quickest to complete, usually taking three to six months.
  • Office audits also take between three to six months to complete. The IRS attempts to complete office audits within the first year of filing, but that is not always the case, which is why it’s essential to hold onto your documentation for at least three years.
  • Field audits take the longest to complete. This type of audit requires someone from the IRS to meet with you or a tax representative. Though the IRS will attempt to begin the audit within the first year, it can take an additional year from the notice of an audit to complete the examination.

Additional Factors in an IRS Audit

There are several other factors that influence how long it will take for the IRS to complete a tax audit.

  • Whether or not the IRS needs to make a lot of adjustments to your return. In this case, the IRS auditor is likely to spend more time examining your return. Consequently, the auditor may investigate additional open tax years still available to examine under the statute of limitations. Seeking professional tax help during an audit is vital to keep yourself protected.
  • If you own a small business. The IRS will take more time to examine a small business audit. Since there is significantly more income that gets tracked with a business tax return, the IRS will need to reference a number of records. As a result, the final decision of an audit might take additional months compared to a standard audit for regular taxpayers.
  • The IRS is pursuing tax penalties based on the return. The IRS can choose to pursue penalties if there are many adjustments made to your tax return. Auditors can stretch the length of the investigation for a year or more if penalties get enforced.

How to Appeal a Tax Audit

Taxpayers have the right to receive representation during an audit. You may also appeal any adjustment made to your tax return by an IRS auditor. Obtaining qualified and skilled tax representation goes a long way towards keeping your finances protected.

As we mentioned, the IRS has three years based on the statute of limitations to pursue an audit for any tax return. The statute of limitations is sometimes extended to six years or more for cases of fraud or substantial adjustments. That being said, be sure to seek out a tax expert as quickly as possible after receiving a notice of the audit.

Contact a tax professional today at Levy & Associates for an initial consultation. You’ll speak to one of our qualified representatives to examine the details of your tax audit. Having someone to defend your case can make the audit process as minimally invasive as possible, as well as allow you to present an adequate defense against an IRS audit.

Levy & Associates is available at 800-TAX-LEVY.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.