The IRS is auditing you - How much should you worry?

I represent taxpayers with tax issues in New Orleans, Louisiana before the IRS, Department of Justice Tax Division and State Departments of Revenue. Tax season can be a stressful time for many individuals and businesses alike. While most taxpayers hope to file their returns without incident, there’s always a chance of an audit by the Internal Revenue Service (IRS). Here are some facts:

• About 150 million total federal tax returns are filed each year

• The IRS audits less than 1% of filers

• Almost 90% of audits result in a change to the tax return

• For mail audits, the average amount owed is more than $7,000

• For office and field audits, the average amount owed is $65,000

Knowing the different types of audits can help prepare for the worst-case scenario.

1. Correspondence Audit.

The correspondence audit is the most common type of audit and typically involves a review of specific items on your tax return. This type of audit is conducted entirely through the mail. If the IRS has questions or needs more information regarding your deductions or claims, they will send you a letter requesting clarification or documentation. Most correspondence audits are manageable and may result in no further action once the requested information is provided.

2. Office Audit.

An office audit takes place at your local IRS office, and it typically focuses on more complex issues than a correspondence audit. You’ll be required to bring documentation to support your claims, and an IRS agent will review your tax return in person. An Office Audit can often be handled by working with an attorney to provide the proper documents and analysis to the auditor in advance, sparing the taxpayer a painful visit to the IRS office.

3. Field Audit.

Field audits are the most comprehensive and time-consuming of the three types. Conducted at your home or business, these audits usually involve a thorough review of your financial records and the IRS uses its most highly trained auditors. Field audits can be intimidating, but partnering with a qualified tax lawyer to help prepare you for all contingencies can help minimize the pain.

Conclusion

While the thought of an IRS audit might cause anxiety, understanding the different types of audits can help you feel more prepared. Knowing what to expect can alleviate some of the stress, whether it’s a simple correspondence audit or a more detailed field audit. Always keep organized records and consider seeking professional advice if needed.

If you or someone you know needs help resolving an IRS tax issue, please contact me at (504) 680-6057 or by email at ian@semmlaw.com.