A tax audit is something that needs to be done when the authorities face any discrepancies with the taxpayer. Basically, in times of some error, the authorities try to reach the taxpayer through various lines of communication, and if it doesn’t end the concern of the authority one needs to understand what the documents the tax department wants to verify.
Here comes the need for understanding the types of work done by the authority and thee different scenarios of audits so that a person stays prepared for a particular one depending on their case.
In this blog, we will discuss the types of tax audits and how they can help a person to differentiate and stay prepared for them in case of any discrepancies.
1. Correspondance Audit
It’s the most typical type of audit, and a person with the mail of this audit doesn’t need to stay confused or panic as it involves solving a part of the tax file by typically filling the 566 letters, and the one needs to state clearly about the part of that tax file.
A person can take the help of an LA tax lawyer or someone with legal expertise, and they can help the individual to sort this out and help to communicate with te IRS. A correspondence audit is something that is about keeping a record of your account and there the IRS matches the tax file returned by the person and the record.
In time of some major changes in both the files, the IRS, to make the records clear sends a correspondence audit request to the individual.
2. Office Audit
The next phase is the office audit, where a person gets intimidation by coming to the IRS office and explaining the tax files returned by the individual. It happens when the numbers are large but not enough that it will attract a field audit. In these cases, a person needs to visit themselves or either with their lawyers in the tax office so that they can maintain compliance.
It’s the process where a person needs to provide answers to some of the questions by the auditors and needs to justify the numbers that are there in the tax file.
3. Field Audit
It’s the most tense and comprehensive types of tax audit where the IRS officers visits the place of the taxpayer or their businesses and checks the tax files when some data are extremely out of the record. A business needs to mitigate these risks fast so that there is less chance of a field audit.
Here, the management of a business that got the notice of a field audit needs to have proper legal cover from an IRS audit attorney, and through their expertise a company can come to a negotiation position where a business can settle the issue mutually.
Through the field audit, the IRS officers look at the management structure and check other details about the firms, which are certainly something a company must avoid as they can tamper with the reputation of the firm.
