Types of Tax Audits: Correspondence Audits Differ from In-Person

Tax audits are not all of the same type.

Many people may think of a face-to-face encounter with a revenue agent when they hear the term “tax audit.” Audits of this type, conducted by a revenue agent at a local office of the IRS or at a business location, are called in-person audits.

In practice, however, a more common format is a procedure known as a correspondence audit – a request from the IRS by letter for specific information relating to a tax return.

In this post, we will take note of the difference between these different types of audits.

Audits conducted by mail can be a low-key and efficient way to resolve informational gaps regarding income, expenses or deductions. But correspondence audits have a potential downside when they allow inaccuracies to creep into the system.

In particular, the IRS has admitted that it needs to improve the process by which it scans and catalogs taxpayer documents gathered through the correspondence audit process. We discussed the scanning error rate in our November 5 post last year.

In-person audits pose rather different procedural issues. For example, you may prefer to bring your books and papers into a local IRS office, rather than having an IRS agent come to your business. And it is indeed possible to make that request.

But there is no guarantee that the IRS will grant a request to transfer the location of an in-person audit.

In short, there are some basic differences between correspondence audits and in-person audits. When you’re talking about an audit, you need to be clear on which one you’re referring to.

Source: IRS.gov, “IRS Audit FAQs,” Accessed June 16, 2014