Chicago Tax Lawyer

Types of IRS Income Tax Audits: An Easy-to-Understand Overview

The IRS issues tax audits yearly. The agency selects some audit subjects randomly. Other auditee choices are based on a calculation known as the DIF score. Below, we review the three types of audits in Chicago used by the IRS.

The Correspondence Audit

This is the most common type of audit. In fact, many people go through this process without ever realizing they experienced one. The correspondence audit is simply a letter sent to you by the IRS that identifies possible errors, information regarding the errors, and instructions on how to remedy the problem.

In some cases, this process may result in a larger refund, but more often than not it means you’ll owe some additional money unless you can prove otherwise. This correspondence also includes information for how to challenge the IRS’s claim and the information you’ll need to fight it.

Either way, these audits are relatively painless, unless you’ve done something major, like failing to report something significant. As long as you take care of the problem in a timely fashion, you’re not likely to encounter any further correspondence from the IRS.

The In-Office Audit

People tremble at the thought of in-office audits. In these situations, you actually have to gather information and take it to an IRS office to prove the accuracy of your return. The auditor will schedule a date and time to meet and suggest what documentation you should bring so that you can substantiate your claim.

If you haven’t kept good records or have lost receipts or other important materials, this can be a daunting prospect.

Without documentation, it can be difficult to prove your claim. Depending on circumstances, it could be as simple as showing a few expenses. Or, it could be as subjective as proving that your home office qualifies for the home office deduction.

Of course, if you have good records and aren’t trying to pull a fast one, even these audits are relatively painless. The IRS may see something differently than you do, but this is your chance to prove it and hopefully fix the issue before being saddled with additional penalties. This is where having a tax attorney or accountant can be a huge help.

The Field Audit

The final type of audit typically doesn’t affect individuals. Field audits are when the IRS sends an agent to meet with taxpayers on-site. The IRS typically reserves these audits for businesses or self-employed individuals.

If you do happen to be subject to a field audit, secure legal counsel. There may be significant sums of money at stake and tax laws can be complicated. Having someone on your side that specializes in tax law can be the difference between saving and losing your business.

Connect With The Gordon Law Group

For years, we’ve represented individuals and businesses going through income tax audits. The Gordon Law Group will take care of your tax audit obstacles so you can get back to life without the IRS breathing down your neck!

Contact us to schedule a Tax Attorney consultation. Get in touch at 847-580-1279.

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