What is the difference between a correspondence audit and a field audit? A correspondence audit is a tax examination handled by mail or through an online IRS account, usually focused on one or a few specific items on a return, such as unreported income, deductions, credits, or missing documents. A field audit is a broader, in-person examination conducted at the taxpayer's home, business, accountant's office, or another agreed location. Field audits are generally more detailed, cover more records, and often involve business operations, asset tracing, or questions about how income and expenses were reported.

The distinction matters because the scope, cost, and risk are different. A correspondence audit is usually narrower and document-driven; the taxpayer answers written notices and sends proof by a stated deadline. A field audit gives the examiner direct access to records, premises, and follow-up questioning, which can expand the review and increase the chance of proposed tax assessments, penalties, or referral for a more serious examination. IRS audit procedures are governed by the Internal Revenue Code and Treasury regulations, and the IRS generally has 3 years to assess additional tax under 26 U.S.C. § 6501, unless an exception applies.

For an injury claim, audit type can affect how a settlement is documented and taxed. If settlement proceeds include taxable portions - such as punitive damages or interest under 26 U.S.C. § 104(a)(2) - a field audit may scrutinize allocation language, medical expense deductions, and related business records more closely than a correspondence audit.