What is an IRS Field Audit?

This post is part of our series on the different types of IRS Audits.

Audit Type: Field Audit

IRS Field Audits are the most in-depth and detailed level of IRS audit examinations. Unlike other audit types, field audits are conducted only by IRS Revenue Agents — the most highly trained type of auditor used by the IRS. Revenue Agents typically have an accounting degree and have completed substantial tax related course work. Many are even licensed CPAs. In addition, many Revenue Agents “specialized” on a particular industry and therefore have a great deal of familiarity with the normal ranges for income and expenses for your specific type of business.

It’s not unusual for the field auditor to immediately request your bank statements and accounting records. If you do not provide them, the auditor will summon them from your bank or accountant. The auditor will then use these statements to reconcile your tax return, looking for errors and discrepancies that may lead to an expanded audit. In the case of closely held corporations, this may even lead to an audit of all the individual owners of the corporation.

Another common method for the auditor to use in a field audit is to compare your lifestyle with your reported income. If the auditor believes that you are living a lifestyle that cannot be accounted for by your income or debt, he or she will assume that you have unreported income.

Due to the invasiveness of field audit, as well as the possibility for things to spiral quickly out of control, we strongly advise that you hire a tax attorney to represent you during this type of audit. IRS Revenue Agents can seem friendly, but their pleasant demeanor is often used to garner your cooperation in order to obtain information that can be used against you later. Even innocent sounding questions are often just part of an overall attempt to get you talking and possibly paint yourself into a corner.

Contrary to popular belief, hiring a tax attorney is not a sign of guilt. Instead, it shows the agent that you take this matter seriously and are not one to be pushed around. Revenue Agents are less likely to take aggressive or unreasonable positions as a result. Furthermore, many Revenue Agents actually prefer to work with a tax professional instead of the taxpayer due to the ease of communication.