A Guide To IRS Audits
Being audited by the Internal Revenue Services is never a fun experience, but you can prepare yourself by reviewing this audit FAQs page from the Law Office of Jin Kim. Learn which type of IRS audit applies to your situation and how to prepare for your examination.
Jin Kim is a tax attorney in Sacramento, California. She represents clients under audit by the IRS, FTB, and CDTFA. To learn more about your tax resolution options call her office at (916) 299-9913 for a free consultation.
What Is A Correspondence Audit?
A correspondence audit is the first kind of audit, and it’s the most common of the three. Out of the total audits that the IRS performs in a year, it’s estimated that around 70% of those audits are correspondence audits. If you’re subject to correspondence audit, it’s relatively good news. As much as possible, you should cooperate if you’re subject to a correspondence audit because failing to do so might have you subject to an office audit instead. Normally, you will be asked to mail information or documents so that the IRS can cross-check these with your tax returns. If you’re not satisfied with the result of your correspondence audit, you can also request a face-to-face meeting.
What Is An IRS Office Audit?
An office audit involves going to an IRS office and having a face-to-face meeting with the auditor. Typically, you will be asked to bring along documents which the auditor will examine or which relate to the tax years under audit. Office auditors are usually concerned with significant items on your tax return, such as large charitable tax deductions.
Can I Ask For A Correspondence Audit Instead of an Office Audit?
If you’ve received notice of an IRS office audit, you can ask the IRS to convert your audit into a correspondence audit if you have a valid reason. Valid reasons for asking this may include being differently-abled, i.e. you won’t be able to go to the local IRS office easily.
Is An Office Audit Going to Take Long?
It will depend on the complexity of the issues, the experience of the auditor, and other factors. A ballpark estimate is that an office audit will take somewhere between one hour to four hours. If you’re subject to an office audit, you should take the day off from work; it’s not something you’ll be done with during a lunch break.
I Received Notice of an Office Audit. What Should I Do Now?
The first thing you should do is consult with a licensed tax attorney. Next, you should examine the notice. You should not call the IRS immediately. In fact, this is one instance when it’s perfectly okay to procrastinate and delay picking up the phone. Make a note of the years you’re being audited for – does it fall within the three-year rule? If it doesn’t, you can call the IRS and attempt to cancel the audit. If everything is in order, you can wait up to thirty days before picking up the phone – and then you should ask to set the date of your audit a month or two from that day. This will give you more time to prepare and find the necessary documents.
What Is An IRS Field Audit?
Field audits are fairly serious and often apply to cash-intensive businesses. It’s the type of audit where the IRS auditor comes to your business or home to conduct the audit. Field audits are usually reserved for high earners or business owners as physical inspection may be required to accurately estimate the tax liability. For instance, a marijuana dispensary may undergo a field audit as the business operates on a cash basis and the auditor may need to be present to accurately estimate the overall financial picture. California businesses are audited for sales tax liability, payroll taxes, and income taxes.
I Received A Call From Someone Claiming To Be An IRS Agent Saying I’m Being Audited. What Should I Do?
If you receive a random call from someone claiming to be an IRS agent who says you’re being audited, hang up the phone. The IRS never notifies anyone of an audit via phone. The IRS notifies taxpayers of audits by U.S. mail.
Should I Answer If The IRS Has Questions For Me On The Phone?
If you’re subject to an office audit and you’re on a phone call with the IRS agent, it’s not a good idea to respond to questions that relate to the case. These off-the-cuff answers might come back to haunt you later. The better option is to say that you’ll discuss the matter with them later at the office. This is especially true if you’re not prepared to talk about those questions or if you’re not sure about the answer yet. Better yet, hire a tax attorney to act as your representative during the audit. Your tax attorney is often in a better position to protect your financial interests during an audit than you are.