The Field Audit is an in-person interview and review of the taxpayer’s records that is usually conducted at the taxpayer’s home, place of business, or accountant’s office. Audits of business returns, especially for self-employed individuals, are often done at the taxpayer’s place of business and are more involved than audits of individual returns. The term “field audit” is used because from the IRS perspective they are done “out in the field” as opposed to their office. Most audits of individual returns (except for the self-employed) are office audits because the returns are not as complex.
The audit notification letter tells you which records will be needed. A field audit will likely involve a comprehensive examination and requires careful preparation. Together with your tax adviser you should thoroughly review your return for potential areas of weakness.
Taxpayers may act on their own behalf or have someone represent or accompany them. If the taxpayer is not present, the representative must have proper written authorization on Form 2848 Power of Attorney. The auditor will explain the reason for any proposed changes. Most taxpayers agree to the changes and the audits end at that level.
Appeal Rights are explained by the examiner at the beginning of each audit. Taxpayers who do not agree with the proposed changes may appeal by having a supervisory conference with the examiner’s manager or appeal their case administratively within the IRS, to the U.S. Tax Court, U.S. Claims Court or the local U.S. District Court. If there is no agreement at the closing conference with the examiner or the examiner’s manager, the taxpayer has 30 days to consider the proposed adjustments and their next course of action. If the taxpayer does not respond within 30 days, the IRS issues a statutory notice of deficiency, which gives the taxpayer 90 days to file a petition to the Tax Court. The Claims Court and District Court generally do not hear tax cases until after the tax is paid and administrative refund claims have been denied by the IRS. The tax does not have to be paid to appeal within the IRS or to the Tax Court. A case may be further appealed to the U.S. Court of Appeals or to the Supreme Court, if those courts accept the case.