What Are the 3 Types of Audits Performed by the IRS?

The Internal Revenue Service (IRS) conducts three main types of audits to verify the accuracy of tax returns and ensure compliance with tax laws. Each audit type varies in scope and location, ranging from simple correspondence to more comprehensive field audits. Here's an overview of the three types:

1. Correspondence Audits (By Mail)

Correspondence audits are the most common type of IRS audit. These audits are conducted entirely through the mail and typically focus on specific issues or discrepancies. Taxpayers may be asked to provide supporting documentation to clarify or verify items reported on their tax returns. Examples of requests may include:

• Proof of income or deductions
• Documentation of tax credits or exemptions claimed

Because correspondence audits are narrowly focused, they are generally less time-consuming and easier to resolve than other types of audits. However, failure to respond or provide adequate documentation can result in adjustments to the taxpayer’s return or additional tax liability.

2. Office Audits (In-Person at an IRS Office)

Office audits require taxpayers to visit a local IRS office to meet with an auditor. These audits are more detailed than correspondence audits and often involve a broader review of the taxpayer’s financial records. Taxpayers may be asked to bring various documents, such as:

• Bank statements
• Receipts for business or personal expenses
• Records of deductions or credits claimed on the return

During the audit, the IRS auditor will ask questions and review the documentation provided to ensure accuracy and compliance. Office audits typically focus on specific issues but may expand to include other items if discrepancies are found.

3. Field Audits (On-Site at the Taxpayer’s Location)

Field audits are the most comprehensive type of IRS audit. These audits are conducted at the taxpayer’s home, place of business, or accountant’s office. Field audits allow the IRS to thoroughly review all aspects of the taxpayer’s financial situation, including records, assets, and operations.

Field audits may cover multiple tax years and typically involve more complex tax situations. The auditor may ask for access to records not initially specified, and the scope of the audit can expand based on findings during the process. Due to the extensive nature of field audits, taxpayers are encouraged to seek professional representation or guidance to ensure proper compliance and documentation.

Final Thoughts

Understanding the types of audits performed by the IRS can help taxpayers be better prepared if selected for an audit. Whether the audit is conducted by mail, in an IRS office, or on-site, maintaining accurate records and responding promptly can help ensure a smoother audit process.