Tax Examination Vs. Tax Audit

The Internal Revenue Service publishes an extensive "IRS Manual" available at Within the manual, the IRS uses the term "tax examination" in several different contexts within its operating procedures, and also in reference to contacting taxpayers. The term "tax audit" refers specifically to an examination of a tax return filed by an individual or corporation in which the filer is called upon to provide specific information about a return.

IRS Manual

Chapter 4 of the "IRS Manual," "Examining Process," includes processes for examining tax returns to select which ones should be audited. It also includes guidelines for auditors when examining information during an actual audit. The IRS manual also uses the term "tax examination" along with other words to instruct employees on procedures for specific activities. Terms such as "gift tax examination" and "employment tax examination" are commonly found.

IRS Tax Letters

If an IRS examination of a tax return reveals confusing or questionable information, it may send a letter to the filer asking for clarification. Such a letter may be considered an audit by the recipient, but by definition, it is not. The matter can usually be resolved by answering the letter with appropriate information. Such a letter may also inform the reporter that the IRS has rejected certain aspects of the return or has made corrections. It may notify the taxpayer of additional charges or, in some cases, of an unexpected refund.

Tax Audit

The term "tax audit" more closely defines a specific process: checking an actual tax return for accuracy and credibility while asking the filer specific questions. If the examination of a return reveals unusual or suspicious entries or claims, the filer is called into IRS offices to clarify the situation. In such cases, the IRS may concentrate on specific aspects of the return, or audit the return in its entirety. Although the filer may consider this an examination, its technical definition is a tax audit.

What to Do

If you receive a letter from the IRS, don't panic. Read it carefully to determine what you need to do. The IRS online article "Understanding Your IRS Notice or Letter" states that "Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office." Most letters require a response in 30 days. If you are required to make a personal appearance in an IRS office, remain calm and be polite. Bring all relevant information pertaining to any questions that may have been asked in the audit letter.

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About the Author

Richard Asmus was a writer and producer of television commercials in Phoenix, Arizona, and now is retired in Peru. After founding a small telecommunications engineering corporation and visiting 37 countries, Asmus studied broadcasting at Arizona State University and earned his Master of Fine Arts at Brooklyn College in New York.

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