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The differences between correspondence and field audits

On Behalf of | Jul 8, 2024 | Tax |

To check if taxpayers are reporting their income and deductions correctly, the Internal Revenue Service (IRS) employs various methods, such as audits. However, the complex world of tax audits can be daunting.

The two primary types of audits are correspondence and field audits, each with unique features and requirements. If you are a small business owner, how can knowing the difference between correspondence and field audits help you in handling an IRS audit?

Correspondence audits

A correspondence audit occurs when the IRS sends a letter to a taxpayer requesting more information about a specific part of their tax return. The taxpayer then responds by mail, providing the requested documentation.

Field audits

On the other hand, a field audit is more extensive. An IRS agent visits the taxpayer’s home or business to examine their records in detail. This audit is typically for more complex tax returns or when the IRS suspects significant errors or fraud.

Contrasts in complexity

A correspondence audit usually involves simple returns or single issues, such as a discrepancy in income. However, a field audit can be more complex, often involving multiple issues, detailed examinations of records and interviews with the taxpayer.

Differences in time and resources

In addition, a correspondence audit typically requires less time and fewer resources from the IRS and the taxpayer. In contrast, a field audit can be more time-consuming and requires taxpayers to prepare extensively. It may also involve legal representation.

Protecting your rights and interests

Understanding audits is crucial in helping you become a more well-informed taxpayer. In the face of an IRS audit, seeking legal advice may guide you in navigating the complexities of tax law. In addition, an advocate may help you better manage the challenges of an audit while you aim to protect your rights and interests during the entire process.