Around five months ago, in my 2017 Annual Report to Congress, I identified IRS audit rates and the distinction between “real” and “unreal” audits, as the fourth Most Serious Problem facing taxpayers. I had previously written about this topic in my 2011 and 2016 Annual Reports to Congress, and discussed it in a blog post six years ago. So, what’s the deal with “real vs. “unreal” audits and why should you care? I need to first give you a little background. Under section 7602 of the Internal Revenue Code (IRC), the IRS has the authority to examine any books, papers, records, or other data that may be relevant to ascertain the correctness of any return. I call these types of examinations, which can occur through correspondence, at the taxpayer’s home or business, or at an IRS office, “real” or traditional audits. However, “real” audits don’t quite end the story. The IRS has several other types of compliance contacts with taxpayers that it does not consider to be “real” audits. These types of contacts, which I call “unreal” audits, include math error corrections, Automated Underreporter (AUR) (a document matching program), identity and wage verification, and Automated Substitute for Return (ASFR) (a non-filer program). Why are these types of contacts, which constitute the majority of IRS compliance contacts, important? First of all, they require taxpayers to provide documentation or information to the IRS and may feel very much like a “real” examination to taxpayers. More importantly, “unreal” audits lack taxpayer protections typically found in “real” audits, such as the opportunity to generally seek an administrative review with the IRS Office of Appeals (Appeals) or the statutory prohibition against repeat examinations. And in case you are curious, the IRS is planning for the increased use of “unreal” audits through automated means with its “Future State” Initiative.