Most taxpayers dread the very thought of having to undergo a
tax audit. In fact, they dread it so much that they don’t even realize that all
audits are not created equally. In actuality, however, there are many different
types of audits. And, while, hopefully, you will never have go undergo any of
them, it’s still important to understand the different types of audits and how
to best handle them.
Correspondence Audits
The most common type of audit is a simple correspondence
audit. These are fairly stress-free since you handle them, at least if all goes
well, via mail.
The IRS will simply request to see copies of your receipts
and/or other documentation, which you mail in. After reviewing the documents,
the IRS agent will either approve your return as is or make any necessary
adjustments, along with penalties if they apply.
While undergoing a correspondence audit is not ideal, it’s
usually pretty simple and straightforward and nothing to worry about as long as
you have all of your documentation in order.
Office Audits
Office audits are very similar to correspondence audits. The
only difference is that, instead of mailing in your documentation, you are
asked to bring it to an IRS office in your area.
This can be a bit more nervewracking than a mail or
correspondence audit, but it’s still manageable if you have your documentation
together. You’ll also be glad to know that these audits are fairly uncommon, so
it’s not likely you’ll have to go through this hassle.
Field Audits
Perhaps the most nervewracking and most serious kind of
audit is when an IRS agent visits you in your home or office. You should still
be prepared with documentation, but know that agents don’t typically pursue
this type of audit unless serious discrepancies are suspected.
If you have been asked to have a field audit or, really, any
type of audit, it’s always a good idea to work closely with your financial
adviser to prepare and to reconcile any discrepancies or problems if they
exist. Of course, if you work closely with a financial professional from the
start, you can greatly reduce your risk of any type of audit happening in the
first place!
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