Receiving an audit notice from the IRS can send anyone into a panic. But not all audits are the same. So, what is the difference between a correspondence and a field audit?
These are tools the IRS uses to verify information on your tax return, but they differ in scope and how they are conducted.
When you know the difference, that can help you respond appropriately and protect your rights. Here is what you need to know.
What Is a Correspondence Audit?
A correspondence audit is the most common type. This is handled by mail. It focuses on specific items on your tax return instead of examining your entire return.
The IRS may select your return for a correspondence audit if it notices discrepancies, missing information, or unusual deductions. There are a few common issues, and these include:
- Math errors
- Missing forms, such as W-2s or 1099s
- Deductions and credits that require documentation
When you receive a correspondence audit notice, the letter will explain what the IRS needs. You may be asked to provide documentation, like receipts, invoices, or statements, to support the items in question.
Once you submit the requested information by mail, the IRS reviews it and makes a decision. Since correspondence audits do not involve in-person meetings, they are faster to resolve than other types of audits.
What Is a Field Audit?
A field audit is more extensive. This involves a face-to-face review by an IRS agent, and you might want to get legal help for it. These audits target returns with complicated issues, large deductions, or substantial discrepancies.
Field audits are used for business tax returns, high-income taxpayers, or situations where multiple areas of a return may be in question.
During a field audit, the IRS agent may need to examine:
- Financial records
- Bank statements
- Invoices
- Contracts
- Other documentation
This review can cover multiple areas of your tax return. Sometimes, they may take weeks or even months to complete.
Due to the level of scrutiny involved, you will need professional representation to make sure your records are presented accurately and your rights are protected.
Responding to Each Type of Audit
No matter the audit, you need to respond. For a correspondence audit, you need to carefully read the IRS letter. Along with that, you want to collect the requested documents so you can show clear evidence to support your tax return.
Working with an IRS tax lawyer can help make sure your response is accurate and complete.
For a field audit, preparation is even more important. You want to organize all financial records in advance. In these cases, you may want to consider having a skilled tax attorney present during the review.
They can act as your representative to attend meetings and help communicate with the IRS on your behalf.
Not All Audits Are the Same
What is the difference between a correspondence and a field audit? The IRS handles these audits differently. Most of the time, correspondence audits can be resolved with organized documentation.
On the other hand, field audits require more planning and professional guidance. When you know what to expect, that can prevent mistakes and protect your interests.
No matter which type of audit you face, you need to stay organized, respond immediately, and get professional advice. The IRS process can be intimidating. However, with a little preparation and knowledge, those are your best tools for resolving any audit.
If you are facing an IRS audit, Easter & DeVore, Attorneys at Law, can assist with the process. You never want to ignore any notice from the IRS. We will walk you through the process and explain your options. Schedule a consultation to find out how we can help with your situation.
