The four types of audits
There are four types of IRS audits: correspondence audits, office audits, field audits, and random audits.
Correspondence audits
The correspondence audit is the most common type of audit and is the easiest type of audit. This type of audit is done entirely through the mail. The IRS sends a letter asking for proof of a particular income item, deduction, credit or exemption. You simply make a photocopy of any documents that prove your case and write an explanation. Then mail the photocopied documents and letter of explanation to the IRS. Never mail the IRS your original documents. Always mail photocopies.
Office audits
The office audit takes place at the IRS office. Office audits are usually more complex than correspondence audits, but are still usually pretty simple. Most office audits concern common items on a tax return such as itemized deductions, exemptions, casualty losses, employee business expenses, and medical expenses. Click handling a face-to-face audit to learn more about how to prepare for an office audit.
Field audits
Field audits take place at your place of business. The field audit is for business owners such as if you own an S Corporation, partnership, or an unincorporated business. The field audit can also be for someone with a complex tax return.
If you are selected for a field audit, you may want to hire a tax professional such as a CPA or enrolled agent to handle the audit for you. A tax professional can try to have the field audit occur at the tax professional's office instead of at your place of business. That shields you from the IRS auditor taking covert observations at your place of business. You do not want the IRS agent searching for income around your place of business, asking questions to your employees and viewing your business operations.
If you do not hire a tax professional, ask to have the field audit occur at the IRS office instead of at your home or business. Click handling a face-to-face audit to learn more about how to prepare for a field audit.
Random audits
Random audits are rare. The IRS selects a few thousand returns each year to look at in great detail to basically gather information on tax compliance. The IRS is gathering fresh data for tweaking its audit formulas and for better understanding where tax cheating and errors are occurring. With a random audit, the IRS looks at every detail of your tax return.
If your tax return is simple and the IRS can verify all the information on your tax return through W-2 forms and other records it has, you may never even know that you were selected for a random audit. But most people selected for random audits will need to meet with an IRS agent as the IRS checks every nook and cranny of your tax return. If you have a simple return, you can probably handle providing the IRS with all the information it needs to verify every item on your tax return. If you have a complex return, you probably should consider hiring a tax professional to represent you for the random audit.
Correspondence audits
The correspondence audit is the most common type of audit and is the easiest type of audit. This type of audit is done entirely through the mail. The IRS sends a letter asking for proof of a particular income item, deduction, credit or exemption. You simply make a photocopy of any documents that prove your case and write an explanation. Then mail the photocopied documents and letter of explanation to the IRS. Never mail the IRS your original documents. Always mail photocopies.
Office audits
The office audit takes place at the IRS office. Office audits are usually more complex than correspondence audits, but are still usually pretty simple. Most office audits concern common items on a tax return such as itemized deductions, exemptions, casualty losses, employee business expenses, and medical expenses. Click handling a face-to-face audit to learn more about how to prepare for an office audit.
Field audits
Field audits take place at your place of business. The field audit is for business owners such as if you own an S Corporation, partnership, or an unincorporated business. The field audit can also be for someone with a complex tax return.
If you are selected for a field audit, you may want to hire a tax professional such as a CPA or enrolled agent to handle the audit for you. A tax professional can try to have the field audit occur at the tax professional's office instead of at your place of business. That shields you from the IRS auditor taking covert observations at your place of business. You do not want the IRS agent searching for income around your place of business, asking questions to your employees and viewing your business operations.
If you do not hire a tax professional, ask to have the field audit occur at the IRS office instead of at your home or business. Click handling a face-to-face audit to learn more about how to prepare for a field audit.
Random audits
Random audits are rare. The IRS selects a few thousand returns each year to look at in great detail to basically gather information on tax compliance. The IRS is gathering fresh data for tweaking its audit formulas and for better understanding where tax cheating and errors are occurring. With a random audit, the IRS looks at every detail of your tax return.
If your tax return is simple and the IRS can verify all the information on your tax return through W-2 forms and other records it has, you may never even know that you were selected for a random audit. But most people selected for random audits will need to meet with an IRS agent as the IRS checks every nook and cranny of your tax return. If you have a simple return, you can probably handle providing the IRS with all the information it needs to verify every item on your tax return. If you have a complex return, you probably should consider hiring a tax professional to represent you for the random audit.
