International taxpayers, like U.S. citizens abroad, green card holders overseas, and nonresident aliens, may face IRS field audits. These are the most detailed audits and usually occur when the IRS identifies significant issues, such as large foreign income, complex international transactions, Foreign Earned Income Exclusion claims, foreign tax credits, or unreported foreign assets.
In a field audit, an IRS Revenue Agent visits the taxpayer’s home, business, or your authorized U.S. representative’s office in person, unlike mail or office audits.
The IRS initiates the process with a written notice, typically Letter 2205-A or 2205-B, sent to the taxpayer’s “last known address,” which may be a foreign address. However, the address to which the IRS sends the audit notice and the location where the field audit is conducted may differ. For the actual field examination, the Revenue Agent typically conducts it at the taxpayer’s home, business, or representative’s office in the United States, as feasible.
For taxpayers living abroad, the IRS rarely conducts traditional field audits outside the United States. Instead, the IRS generally begins the audit by mail and may continue it through correspondence, phone calls, or approved video conferences when appropriate and more convenient for the taxpayer. If an in-person meeting is necessary, the IRS may schedule it at an IRS office or another suitable location in the United States, especially if the taxpayer or their representative is already there.
Generally, the IRS relies on tax treaties and information exchange agreements with foreign countries to obtain records and information. It generally does not use U.S. embassies/consulates or foreign embassies to perform field audits.
The IRS stations a small number of Tax Attachés (formerly Revenue Service Representatives) at select U.S. embassies abroad. Their role is limited to administrative support and coordination, facilitating information exchanges and acting as a liaison with local tax authorities. They do not conduct audits or examinations.
Next, let’s understand the field audit procedure for records located outside the United States.