Audits

Question 0

Approximately what percentage of tax returns are audited each year?

Answer 0

Varies from year to year, but typically around 1%

Question 1

What are the three types of audits, and some of their key characteristics?

Answer 1

Correspondence - Least serious. IRS agent sends questions by letter, and you respond by letter. Often relatively minor issues.

Office - More serious, but usually survivable. Conducted in IRS local office. You are given plenty of notice so that you have time to prepare.

Field - A field audit is conducted in your home or place of business. Very serious, usually associated with strong suspicion of fraud. Plan on hiring an EA.

Question 2

What roles do Enrolled Agents play in an audit?

Answer 2

EA’s are generally former IRS agents. They often also CPAs, and are particularly helpful in preparing for and getting an audit.