If you read my previous post on IRS examinations, you know that an audit or examination begins with a letter from the IRS. This letter tells you that your return has been selected for audit and gives a brief description of what they are requesting. The examination process is similar whether it is a correspondence, office or field audit. The IRS will request information related to your return and make judgments on whether the information provided satisfies the requirements of the Internal Revenue Code and IRS publications. The agent will then either deny or allow the expenses and credits based upon that information.
Unfortunately, the audit process is similar to what most people imagine that is like, especially if it is a field or office audit. The correspondence audit is an audit but is completed through the mail and phone calls. The experience most people associate with an audit comes from the field and office audits. In a field or office audit, the IRS revenue agent sits in the room across from you and requests information and based on the information provided will request more information after the initial meeting. The Internal Revenue Manual (IRM) limits what an agent can request and ask but these limits are fairly broad. If you are trying to handle an audit yourself, it is in your best interest to take a look at the IRM.
After the audit is complete, there is some back and forth, with the agent, regarding the determination and the amount owed. However, if you do not have additional information related the audit, the agent will generally close the examination and issue a determination letter. The determination letter is also know as the 30-day letter. If you do not reply within 30 days, the Statutory Notice of Deficiency is issued and you have 90 days to file a tax court petition. After the determination letter is issued, the appeals process begins. Appeals is usually where the arguments are made and better results occur. I will discuss the appeals process in my next post.
As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web. Please do not rely on this article without consulting your tax professional.
If you have received an examinations (audit) letter from the IRS or have questions about an audit, contact a tax professional.