Posted On June 23, 2020

Types of IRS Audits and Possible Outcomes

There are three general types of IRS audits that range in severity and may result in one of three possible outcomes. Understanding what types of audits the IRS uses, and their possible outcomes can help taxpayers prepare appropriately. Taxpayers should never ignore notices from the IRS, regardless of the type of audit being conducted. Instead, they should seek tax audit help if they do not understand what steps to take next.

1. Mail Audit

The least severe and simplest of all IRS audits is the mail audit. This type of audit does not require meeting with an auditor in person. With a mail audit, the IRS may simply be requesting additional information like supporting documentation for a deduction. For example, the IRS may request proof if the taxpayer claimed a substantial amount in charitable donations. By complying with the request for information by supplying proof, like copies of canceled checks and receipts, this is typically enough to satisfy the IRS.

2. Office Audit

An office audit requires the taxpayer to meet in-person with an auditor at their local IRS office. This type of audit is usually more in-depth than a mail audit. The auditor will ask questions about the tax return. Taxpayers are typically asked to bring specific information to their audits like business records or their personal bank statements and receipts. The taxpayer may bring an accountant or lawyer who is providing tax audit help to represent them to the meeting.

3. Field Audit

A field audit is the most thorough of all the types of audits the IRS conducts. This type of audit is done when the IRS has more than a couple questions about information filed on a tax return. It will typically most, if not all, items on the return. These audits are conducted at the taxpayer’s place of business or home and an accountant or lawyer can be present.

Three Possible Outcomes from an Audit

There are three possible outcomes that can come from an audit. The best case scenario is that the taxpayer has supplied the information requested, answered any questions the IRS had, and there are no changes needed with the tax return. The next scenario would be that the IRS proposed changes to the return and the taxpayers understands, agrees with the changes, and pays whatever deficiencies exist, including any penalties owed.

The most serious outcome occurs if the taxpayer disagrees with the IRS’s proposed changes to their tax return. In this scenario, the taxpayer has the right to appeal the findings and request a conference with an IRS manager.