Every year, taxpayers must file a tax return, reporting their income and calculating the taxes they owe through a process known as “self-assessment.” While filing taxes can feel like an annual inconvenience, the self-assessment system provides a unique opportunity for taxpayers to determine their own tax liability. Unlike property taxes, where local governments appraise your property and place the burden on you to dispute inaccuracies, self-assessment shifts the burden to the IRS to challenge your calculations.
However, this system comes with a significant caveat: the IRS does not have to agree with your self-assessment. When discrepancies arise, the IRS may initiate an audit, or as they call it, an “examination.”
Types of IRS Audits
- Correspondence Audit
- This is the most common type, accounting for about 80% of IRS audits.
- Conducted entirely through mail or phone, it requests additional documentation to verify the accuracy of your return.
- No in-person meetings are required, and communication over the phone is optional.
- Office Audit
- Requires an in-person meeting at your local IRS office.
- You may send a representative to attend on your behalf.
- Field Audit
- Conducted at your home or business, initiated when the IRS suspects hidden assets.
- The agent will look for visual evidence and review records on-site.
Preparing for an Audit
Audits, regardless of the type, should be taken seriously. You are entitled to legal representation, which can significantly reduce stress and improve the chances of a favorable outcome. Andrew Margolies, an experienced Dallas tax attorney, can provide skilled representation to guide you through the audit process.