Getting an audit letter from the IRS is stressful, but an audit is a process with defined steps, rights, and deadlines. Knowing what to expect helps you avoid mistakes that make a routine review more expensive. Here is how an audit usually unfolds.
1. The IRS sends a letter
Audits begin by mail. The IRS does not start an audit with a phone call, text, or email, so be cautious of anyone claiming otherwise. The letter states which tax year is under review, which items the IRS is questioning, and the deadline to respond. Read it carefully and note that deadline: missing it can limit your options.
2. The type of audit is set
A correspondence audit is handled entirely by mail and usually covers one or two items, such as a deduction or credit. An office audit asks you to meet with an IRS examiner at a local office. A field audit is conducted by a revenue agent, often at your home, business, or your representative's office, and typically covers more of the return.
3. The IRS asks for documents
The examiner will request records supporting the items under review, often through a formal Information Document Request. That may include receipts, bank statements, invoices, mileage logs, or business records. Providing what is asked for, organized and on time, matters. Volunteering information beyond the request is a decision best made with advice.
4. Interviews and follow-up questions
In office and field audits, the examiner may want to interview you. You have the right to be represented, and an authorized representative can generally attend or appear in your place. Answers given in an interview can shape the outcome of the audit, so preparation is important.
5. The examiner reaches a conclusion
An audit ends one of three ways: no change to your return, an agreed change where you accept the proposed adjustments, or a disagreement. If changes are proposed, the IRS explains them in a report, which may include additional tax, interest, and penalties.
6. If you disagree: Appeals
If you do not agree with the findings, the IRS will typically send a letter (often called a 30-day letter) giving you the opportunity to request review by the IRS Independent Office of Appeals. Appeals is separate from the examination function and considers the hazards of litigation, so many cases settle there.
7. Notice of Deficiency and Tax Court
If the matter is not resolved, the IRS issues a Statutory Notice of Deficiency, often called a 90-day letter. You generally have 90 days (150 days if addressed outside the United States) to petition the U.S. Tax Court, which lets you contest the tax before paying it. This deadline is strict and cannot be extended.
Practical tips if you are being audited
- Do not ignore the letter. Calendar every deadline it lists.
- Respond only to what is asked, and keep copies of everything you send.
- Gather and organize records for the specific items under review.
- Consider representation before any interview, especially in a field audit.
- If the examiner raises fraud or asks about intent, stop and get legal advice.
Get help from someone who has seen it from the inside
Bernie McCarthy spent 17 years with the IRS, including as a Revenue Agent and as a trial attorney in the Office of Chief Counsel. He now represents taxpayers through every stage of an audit, from the first document request through Appeals and Tax Court. Learn more about our irs audit defense services.
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This article provides general information, not legal advice for your situation.