The IRS has general audit categories:
- IRS Notices
- Letter (or Correspondence) Audit
- Office (or Desk) Audit
- Field Audit
- Taxpayer Advocate
- State Notices
General Information about IRS Notices and Audits:
For information on a specific IRS notice, visit Notice Review - IRS Notice Listing. To contact TaxAct for assistance with your IRS or state notice, see Received an IRS or State Notice.
What you need to know about IRS notices and audits:
After you file your return, the IRS reviews the accuracy of your computations and income. The IRS compares your return against the Forms W-2 Wage and Tax Statement and Forms 1099 it receives from your employers and anyone else who has reported payments to you.
If a discrepancy or error is found, you’ll get a notice in the mail advising you of the corrections and any additional tax due. You may also be asked to substantiate tax credits or deductions by submitting additional information. You can voluntarily submit additional information or request an interview if you disagree with the IRS assessment.
You’ll be notified by mail if your return is chosen for a more thorough examination, which may occur a year or two after it’s submitted.
Where the IRS examination of your return takes place:
The examination can be conducted by mail or in person at your home, place of business, or your accountant’s office (field audit). You can request a change of time, location, or method of examination if the scheduled interview is inconvenient. You also have the right to make an audio recording of the interview, as long as you give written notice to the IRS agent at least 10 days ahead of time.
Designating a third party to discuss your return:
You can designate a third party to discuss your return with the IRS at the bottom of Form 1040 U.S. Individual Income Tax Return. This person doesn’t need to be a tax professional and can be a friend or relative. The designee’s communication with the IRS may address processing issues such as mathematical errors, missing information, or refund and payment questions.
Sign a power of attorney on Form 2848 Power of Attorney and Declaration of Representative to have a designee discuss underreported income, IRS appeals, and collections notices.
Understanding what’s included in an IRS notice:
Most notices will have the following information:
- Notice Number
- Summary Section (or Header Section): Provides a summary of the notice and instructions on what to do to determine if you agree or disagree with the proposed changes.
- Explanation Section (or Body Section): May show the information reported to the IRS that differs from the information reported on your return. You can compare the income documents you’ve received with the information reported to the IRS. This section should also provide the reason the adjustments are being made to your return.
- Response Section: Explains how to let the IRS know whether you agree or disagree with the proposed changes. This page (or a copy of this page) should be attached to any response sent to the IRS.
Tips for responding to IRS notices:
- CP Number: Each notice sent out by the IRS contains a CP number located in the upper-right corner of the first page. The CP number is also found on the last page of the notice if it contains a tear-off stub to return with a payment or reply.
- Assistance: There may be a phone number to call for help. (If you call, have a copy of the notice and a copy of your return in hand.)
- Filing an Amended Return: Do not file an amended return unless specifically instructed to do so.
- Response Times: Respond within 30 days of the date of the notice (60 days if you live outside the United States).
- Lost Envelope: If you lost the envelope that came with the notice, send your response to the address listed in the upper-left corner of page 1. Enclose a copy of the notice with the response.
- Indicate the Correct Tax Year: Verify the tax year in the upper-right corner of page 1. The notice may be for the most current tax year filed, but it also may be for a prior tax year.
- Review the Explanation Section: (If applicable to your notice.) This will give you an idea of what items are being adjusted.