When taxpayers hear the words "IRS audit," many immediately cringe and envision sitting in a cold room with an agent awaiting a hefty sentence for a minor infraction. However, it's important for individuals to understand that not every audit is treated equally, and in some cases, the tax agency simply wants to clear up simple errors or questions that triggered a red flag. Understanding the different types of audits can help people know what to expect, gather the proper documentation and determine if they need their tax preparer or other representation by their side.
A correspondence audit is one of the most common and least severe type of examinations. This audit involves the IRS sending a letter to a taxpayer requesting more information about a particular aspect of their tax return. This may include an inquiry about a particular deduction that was claimed, such as a home office or charitable contribution write-off. In most cases, the agency may simply ask for receipts or other documents to prove that a deduction is valid, therefore, it's important to keep these records for at least a three year period when the statute of limitations runs out.
An office audit is the next type of examination, in which taxpayers must meet with an agent at an IRS office. Because these can be more nerve-wracking and intensive, individuals may consider having their tax professional attend the meeting with them to help answer questions. These examinations may focus on one or several aspects of a person's tax return, and it's likely that agents will request several pieces of documentation that will scrutinized closely.
Lastly, field audits are the most serious and comprehensive, and IRS agents may visit a home or business to examine financial statements, investment reports and other elements of their finances used to file their taxes. While the other types of audits are limited to certain aspects of a person's tax return, agents may be looking for a wider scope of information under a field audit, meaning they will leave no stone unturned. As these audits tend to be serious, having representation available is a smart idea.
Tips for meeting with an agent
When consumers find out they must meet with a field agent, there are a few tips they should follow to make the process as smooth as possible. First, don't say more than necessary. A lengthy explanation, while seemingly harmless, can pique an agent's interest and prompt them to dig further than they would have otherwise. Second, consult with a tax preparer beforehand to know what to expect. This will help taxpayers know which documents to gather to avoid wasting the agent's time. Lastly, be courteous. Rudeness or a poor attitude toward an agent can only make matters worse.
Liberty Tax® offers audit assistance and accurate tax preparation with a money-back guarantee. Liberty Tax®'s network of knowledgeable tax preparers work to get consumers the largest possible refund or lowest tax liability. They stand by taxpayers throughout the IRS audit process. For more information on audit assistance or to view a complete list of services that Liberty Tax® offers, visit www.libertytax.com.
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