Tax Law 101: An Audit vs. Correspondence Audit vs. Adjustment Letter

Coming home to a notice from the IRS is never a fun moment, regardless of whether or not you are someone who always pays their taxes and submits their returns on time. However, just because you received a letter from the IRS doesn’t mean there’s any reason to panic. Although you might have thoughts of a terrifying tax audit circling in your brain, it’s actually fairly unlikely that a comprehensive audit is on your horizon. In fact, the IRS only traditionally audits a very small number of tax returns per year. Instead, you’re more likely to receive notice of what is called a correspondence audit or maybe just an adjustment letter. So, what are these things? How do they differ from a traditional audit? Let’s discuss.

The Audit

The traditional audit fills everyone with dread and, depending on the reason for the audit, it’s understandable as to why. Although there are three categories of audits, we will first discuss the Office and Field Audits because they are much more comprehensive than a Correspondence Audit as you will soon see.

First is the office audit, which occurs in-person where an IRS representative will interview you and inspect your records. Prior to the meeting, you will receive a letter that explains the type of audit and any documents you will need to bring with you. The main purpose of this type of audit is to double check what the taxpayer reported on their tax return and make sure everything is correct and in compliance with tax laws. The IRS either selects taxpayers at random or because the system flagged an error.

Next up is the field audit. Unlike an office audit, a field audit occurs at the taxpayer’s home, place of business, or their accountant or lawyer’s office. These tend to be the most comprehensive of all the audits and can require multiple meetings over the course of several weeks.

The Correspondence Audit

In comparison to office and field audits, correspondence audits are the least extensive. Instead of meeting with an IRS representative in person, the audit is conducted entirely via correspondence, as its name suggests. This type of audit is very limited in scope and is usually resolved fairly quickly once the taxpayer is able to show the IRS what it wants to see. If there is a reason the issue cannot be resolved this way, then the IRS may escalate it to an office or field audit.

The Adjustment Letter

Finally, an adjustment letter should signal the lowest level of concern for taxpayers in comparison with the audits discussed above. This is because an adjustment letter is just that, a letter. Typically, it will be informing the taxpayer of some type of adjustment that they had to make in connection with their tax return. This can be something like additional taxes owed because of a simple math error made on your return.

Contact Boeshaar Law today.

Dealing with the IRS is stressful, particularly when you receive a notice that something is either wrong with your tax return or that you now owe more money because of an adjustment or error. At Boeshaar Law, we regularly help our clients with all of their IRS tax issues, from compliance to audits to appeals. If you have received a notice from the IRS and have questions about what it means for you, please don’t hesitate to contact us right away at (206) 899-4860!

Written by Robert V. Boeshaar

Robert V. Boeshaar

Robert V. Boeshaar is a Seattle tax attorney committed to helping individuals and small businesses who are facing problems with the IRS. He believes in using his experience to serve others and to make a difference in their lives.