Possible Underreporting of the Numbers of Audits

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According to one commentator, the IRS suggestion that less audits are occurring is not entirely true. The problem with what the IRS is telling you is that they may define audits differently than other authorities.

When sending out written notices to taxpayers, the term “audit” usually does not appear. Instead of “audit,” the IRS uses the term “examination.” Yet it’s not clear what the difference is between an audit and an examination.

The types of IRS audits

There are three sorts of audits:

  • Correspondence audit: An audit performed by mail
  • Office audits: An audit conducted at an IRS office
  • Field audits: Audits that may either take place at your residence or your business office

Data from the IRS does not include every agency activity when reporting the numbers of audits, however. For example, they do not report as audits notices concerning underreporting of income, notifications of math errors, and notices concerning identity and wage verification. If there was reporting of these items, the number of reported audits would dramatically rise.

The IRS is not conducting as many field and office audits as it used to do. Yet the impact of audits is apparent as the IRS continues collecting back taxes for those allegedly owing money. And the IRS has been efficient in collecting such funds. For every dollar the IRS spends on enforcement activities, it receives a return of $6.16.

There is possibly another more severe consequence in the IRS understating the numbers of audits. By not labeling enforcement actions as audits, taxpayers may not avail themselves of their rights as taxpayers. It is difficult to appeal the result of an audit that supposedly never took place.

What should you do?

As we’ve said many times before, Michigan taxpayers need to take enforcement actions by the IRS seriously and consider legal representation. Tax attorneys work towards protecting the rights of taxpayers. This can include providing representation in an enforcement action taken by the agency. You do not want to be a victim of additional audits or repeat examinations. And you will want to clear up any confusion as to whether you were guilty of wrongdoing or owe additional taxes.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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