Audit Representation

The IRS can conduct three kinds of audits; Correspondence Audits, In-Office Audits, and Field Audits. All three are very similar in structure and outcome, but vary in length of time and depth. The purpose of an Audit is to assess additional tax over that reported. The IRS is prepared for the audit and knows how to corner you into accepting the reality that they present. In an audit, the IRS has the advantage because the taxpayer bears the burden of proof. In other words, they are right until you prove otherwise.

Correspondence Audits (or Mail Audits) are favorable because they usually look into fewer potential issues, and you have more time to prepare the proof for each alleged change. This is the longest of the three types of audit because there is the time allowed for response and mailing. Some mail audits can drag out for many months. Representation is beneficial so that you don’t have to worry about what is going to happen, and it will give you peace of mind over the course of the audit.

In-Office Audits usually only last a day, but you are required to come prepared. They give you a list of issues, and give you a couple weeks to prepare your proof. The problem is that they take place at an IRS office. This can be very stressful for you if you are not fully prepared and don’t have proper representation. If you forget a single piece of paper or say the wrong thing, it can be a several thousand dollar mistake.

Field audits are the most intrusive because they usually take place at your home or place of business. It allows the most freedom for the auditor to examine more issues in depth and create the largest additions to your balance due. If you have representation, they can go to your representative’s office and conduct the audit there, keeping them out of your home or office, and away from additional records that can use against you. These audits usually last anywhere from a single day, and last up to a week or two.

It is important that you have representation! Audits with representation tend to assess less tax than if you were to handle it yourself. In most cases, hiring someone to represent you will more than pay for itself based on the amount of taxes, penalties, and interest that you will save. The IRS will assess either a 20% penalty for negligence in filing, or a 75% penalty for what it considers fraud or intent in underreporting the tax you owe. They assess more 75% penalties in self-conducted audits, versus those that hire representation to articulate that based on tax law the higher penalty is not merited.