An Internal Revenue Service (IRS) audit letter can cast a chill over any season. As the calling card of the IRS, an audit letter can trigger anxiety the minute you pull it from the mailbox.
Why the IRS might select you for an audit
One of the first questions that an audit letter raises is why you were selected for an audit. Sometimes the reason is clear—the figures you reported on your tax return do not match what the IRS shows for your income. Or, there could be errors on your return, a claim for a tax credit for which you are marginally qualified—or there may be transactions referenced in your return that relate to other taxpayers who are of interest to the IRS. A lot of the time, it is the luck of the draw—you could just be a random pick.
If you are heading for an audit and you know there are questions in your tax background, on your tax return, or you provided inaccurate information, your first call should be to your trusted tax attorney. If you have anything to hide, you could be looking at an eggshell audit where you will need experienced legal counsel. It is important to know in advance if any of your actions could be perceived as tax fraud by an IRS examiner.
Types of IRS audits: mail vs. in-person
The IRS conducts audits by mail or in person. Audits by mail are called “correspondence audits” because they involve document shuffles back and forth between the taxpayer and examiner. Most of the audits conducted by the IRS are correspondence audits. In 2024, 77 percent of audits were by mail. From those audits, the IRS recommended an additional $6 billion in taxes.
In-person audits can take the form of an office audit at a regional IRS office or a field audit, which is conducted in your place of business or home. Office audits are the second most common type of audit. In 2024, 22 percent of audits were conducted in person and resulted in an additional $23 billion in recommended taxes. In-person audits can be lengthier, more complex, and rigorous than correspondence audits.
The IRS may request a wide variety of documents during your audit. These include everything from standard receipts and tax documents to medical records, along with legal and loan documents. Your audit letter will suggest the documents initially needed and how they should be prepared.
How to prepare for an IRS audit
Whether your audit is via correspondence or in person, speak with a tax lawyer to discuss concerns before the audit. Experienced legal counsel can review the audit letter request and your documents to better position you for the audit ahead—or attend with you.
Forewarned is forearmed. A surprise question from an auditor in the middle of an audit can be difficult to navigate if you do not know what the examiner is thinking. Get good counsel and remember, last year, more than 14,000 IRS audits ended with a recommendation for a refund for the taxpayer.
Concerned about a criminal tax investigation?
If you are involved in tax evasion, your best defense is skilled legal representation. If you have filed questionable tax documents or failed to file regulatory reports, make the smart choice to obtain legal help. Call us at 440-250-9709 or reach out to set up a consultation. We serve domestic and international clients from offices in Cleveland and Chicago.
Not sure what to expect if you are already under scrutiny? Download our free eBook, Understanding Tax Fraud, for insights into warning signs and potential legal defenses.
