Received an IRS Audit Notice? What You Should Do
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Getting a letter from the IRS that says you’re being audited can raise a number of questions, and it may be a bit scary. While it’s natural to feel anxious, the truth is that most audits are routine and can be resolved with proper documentation and a clear response.
What an IRS Audit Actually Means
An IRS audit is a review of your tax return to verify that your income, deductions, and credits are accurate. The IRS isn’t accusing you of wrongdoing; it’s simply taking a closer look at your return to confirm that everything checks out. There are three main types of audits:
Correspondence Audit
The most common and least invasive. This is handled entirely by mail and usually involves a request for additional documents or clarification on specific parts of your return.
Office Audit
Conducted in person at an IRS office. You’ll be asked to bring specific documents and possibly meet with an IRS examiner.
Field Audit
The most comprehensive, and involves someone coming out. These are usually reserved for more complex situations or high-income taxpayers.
Why You Might Receive an Audit
Not all audits are random. While some taxpayers are selected purely by statistical algorithms, others are flagged because something on their return stood out. Common audit triggers include:
- Mismatched information (e.g., a 1099 you forgot to include)
- Unusually large deductions relative to your income
- Home office or business expenses that appear excessive
- Round numbers everywhere (a sign of estimation rather than exact figures)
- Cash-intensive businesses
- High income, taxpayers earning $500,000+ are more likely to be audited
- Amended or late returns
It’s worth noting: being audited doesn’t mean you did anything wrong. The IRS often just wants more documentation.
What to Do When You Receive an Audit Notice
If the IRS contacts you about an audit, here are some next steps you might take. Remember, when in doubt, consider consulting with a tax or legal professional, such as a licensed attorney or certified public accountant.
1. Read the Notice Carefully
The IRS will specify the tax year being audited, the issues in question, and the documents they require. Don’t assume, read everything.
2. Check the Deadline
You typically have 30 days to respond. Missing this window can escalate the situation and potentially lead to penalties.
3. Gather Relevant Documents
This may include W-2s, 1099s, receipts, bank statements, mileage logs, invoices, or proof of charitable donations. Don’t send anything that isn’t requested.
4. Respond Clearly and Completely
Provide copies (not originals) and keep everything organized. Don’t include extra explanations unless they’re directly helpful. The goal is to answer the IRS’s questions, nothing more, nothing less.
The most comprehensive, and involves someone coming out. These are usually reserved for more complex situations or high-income taxpayers.
Should You Call a Tax Professional?
In many situations, the answer is yes, reaching out to a tax professional can be a smart move, especially if any of the following apply:
- You run a business or are self-employed: Business income, deductions, and record-keeping requirements can be complex. A professional can help ensure your returns are accurate and defensible.
- The audit involves more than a simple math error: If the IRS is questioning issues like unreported income, deductions, or credits, the stakes may be higher than you realize.
- You’re unsure what the IRS is questioning: Audit letters can be vague or confusing. A professional can interpret the notice, identify the real issues, and help you respond effectively.
- You’re being audited in person (office or field audit): In-person audits typically involve a deeper examination of your finances. Having someone who knows tax law on your side can make a big difference.
Certified Public Accountants (CPAs), Enrolled Agents (EAs), and tax attorneys are all licensed to represent you before the IRS. These professionals understand tax law, audit procedures, and your legal rights. They can help gather and organize documentation, explain your position clearly to the IRS, and negotiate on your behalf if needed.
Even if the audit seems minor or routine, a brief consultation with a tax professional can help you avoid missteps. It saves you time, reduces stress, and even lowers your tax liability. When in doubt, getting expert advice is rarely a bad idea.
The Typical IRS Audit Process
Here’s what to expect during a standard audit timeline:
- You receive an official audit letter by mail (never via phone or email, those are scams).
- You gather and send the requested documents (or schedule an appointment).
- An IRS examiner reviews the materials and may follow up with questions.
- The IRS issues a determination; they may accept your return as-is, propose changes, or assess additional tax.
- You can agree or appeal. If you disagree, you have the right to request a conference with an IRS manager or take your case to Tax Court.
The audit process can last anywhere from a few weeks to over a year, depending on complexity and responsiveness.
Common Pitfalls and Extra Considerations
Don’t Ignore the Letter
Letting the deadline pass will not make the audit go away; it will only increase the likelihood of additional penalties or assumptions against you.
Watch for Scams
The IRS will never call or email you first about an audit. Initial contact is always by mail. Be wary of anyone demanding payment or threatening arrest.
Keep Good Records Year-Round
You don’t want to be scrambling for receipts or invoices months (or years) after filing. Organized, digital recordkeeping is your best defense.
Audits Can Go Back 3 – 6 Years
In most cases, the IRS audits returns from the past three years. If substantial errors are found, they can go back up to six years.
Conclusion: Stay Calm, Be Proactive, Get Help if Needed
An IRS audit isn’t a disaster; it’s a process. The key is not to panic, not to ignore the notice, and to respond clearly and promptly. Most audits are resolved without major changes or penalties, especially if you keep detailed records and get professional advice when needed.
If you’ve received a notice, take a breath, read carefully, and follow through. And remember: the IRS has a job to do, but so do you. Being informed, prepared, and honest is the best way to get through it.
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