Preparing for an IRS Correspondence Audit: Records to Gather

Quick overview

An IRS correspondence audit asks for documentation about particular line items on your filed return — for example, unreported income, questionable deductions, or mismatched information returns. The IRS letter will list exactly what they want and a deadline to respond (often 30 days but check the letter). Responding with a clean, well-organized packet speeds resolution, reduces follow-up requests, and lowers the chance of additional penalties.

In my 15+ years advising taxpayers, the difference between a quick, favorable outcome and prolonged correspondence usually comes down to two things: (1) having the right records and (2) presenting them clearly. Below is a prioritized checklist of documents, practical assembly tips, and guidance on retention and next steps.

Priority documents to gather (by issue type)

Start with the documents the IRS asked for, then supplement with the broader items listed below. Keep originals safe; send copies unless the IRS specifically demands originals.

• Tax return in question (full copy of the filed return, including schedules and worksheets).
• IRS notice or letter (include the original notice and any prior correspondence).
• Proof of identity (copy of driver’s license or Social Security number for the taxpayer named on the return) when required to verify identity.

Income documentation:

• W-2 forms, 1099-NEC/1099-MISC, 1099-INT, 1099-DIV, 1099-B, 1099-R, and K-1s.
• Bank statements and deposit records that match reported income.
• Invoices, contracts, sales receipts, or booking logs (for freelancers, gig workers, rental hosts).

Expense and deduction documentation:

• Receipts and invoices for business expenses, supplies, repairs, professional fees, and advertising.
• Canceled checks or credit-card statements showing payment for deductible expenses.
• Mileage logs and vehicle expense records (date, miles, purpose, odometer readings). Electronic logs are acceptable when they include required details.
• Home-office documentation: floorplan showing exclusive business use, square footage calculations, utility bills, mortgage interest (Form 1098), and any direct expenses.
• Charitable contribution receipts (written acknowledgments from charities for gifts $250+; bank or card statements for smaller gifts).
• Medical expense receipts and insurance statements (if claiming medical deductions).

Investment and asset records:

• Brokerage statements, trade confirmations, and Form 1099-B with basis documentation for sold securities.
• Closing statements (HUD-1, settlement statements) and proof of basis for real estate sales.
• Records showing depreciation schedules and cost-basis calculations.

Business and payroll records:

• General ledger, profit & loss statements, balance sheets, and year-end summaries.
• Payroll records, Forms W-2 and W-3, Form 941 filings, and 1099s issued to contractors.
• Business licenses, registrations, and franchise or lease agreements.

Other supporting documents:

• Proof of education credits (Form 1098-T), student loan interest (Form 1098-E).
• Insurance documents, casualty loss paperwork, and disaster declarations if relevant.
• Legal contracts (settlements, prenuptial, contractor agreements) that explain income or deductions.

How to assemble an audit packet (step-by-step)

1. Read the IRS letter carefully: copy the letter’s case number, date, and the exact items requested. The IRS uses this info to attach your response correctly.
2. Create a one-page cover letter: include the tax year, taxpayer name, SSN (last 4), the IRS notice number, and a short statement such as “Enclosed are records in response to your letter dated [date].”
3. Provide a table of contents or checklist at the front that maps each IRS request to your supporting documents (e.g., Item 1: W-2 — Tab 1: Employer W-2 copies).
4. Use labeled tabs or numbered pages. Highlight or annotate copies to show exactly where the supporting information is located.
5. Include a short explanatory memo for any items that are unclear (e.g., why a payment was classified as capital expense). Keep it factual and cite your records.
6. Send copies, not originals. If an original is required, explicitly request return of originals in your cover letter and send by trackable mail (certified with return receipt).
7. Keep digital copies of everything you mail. Scan documents in PDF format and store them in at least two secure locations (cloud backup + local encrypted drive).
8. Use certified mail with return receipt or the IRS-authorized secure upload method if the notice permits online submission. Retain proof of delivery.

For more on building and labeling your packet, see our guide on Preparing a Document Packet for an IRS Correspondence Audit.

What to write in your cover letter and notes

• Be concise and factual. Avoid long narratives or emotional language.
• For disputed items, include a short bullet-point explanation and cross-reference the documents attached.
• If a requested document is missing, explain why and provide alternative evidence (bank statements, summaries, affidavits) along with a plan to locate the original.

Sample cover-letter opening (editable):

“Re: Tax Year [YYYY] — [Taxpayer Name], SSN: xxx-xx-[last4]
Enclosed are documents in response to your letter dated [date] requesting verification of [specific items]. Please contact me at [phone] if you need additional information.”

Retention rules and how long to keep records

Follow IRS guidance for retention:

• Keep records for at least 3 years from the date you filed the return or 2 years from the date you paid the tax, whichever is later, for most situations. (IRS guidance)
• Keep records for 6 years if you omitted more than 25% of your gross income.
• Keep records indefinitely if you didn’t file a return or filed a fraudulent return.

These are general rules — see the IRS recordkeeping guidance for details. In practice, I recommend keeping business records and property records for at least 7 years when possible.

Common mistakes that prolong audits

• Sending disorganized stacks of unindexed papers without a cover letter or table of contents.
• Mail sent without tracking or proof of delivery.
• Failing to include the IRS notice number and tax year on the response.
• Relying on verbal explanations without attaching written supporting documents.
• Destroying supporting records too early — sometimes the IRS asks for prior-year records.

When to involve a tax professional or appeal

If the requested items are straightforward, most taxpayers can respond themselves. Contact a qualified CPA, enrolled agent, or tax attorney if:

• The adjustments would result in significant tax, penalties, or interest.
• There are legal questions (e.g., classification of income vs. loan, or basis of assets).
• You suspect identity theft or notice of proposed tax due exceeds your records.

If you disagree with an audit outcome, you have appeal rights through the IRS Office of Appeals. Document all communications and consider professional representation. See our related resources on How to handle an IRS audit letter? and How to Gather Records for an IRS Audit: A Step-by-Step Guide.

Practical tips and time-savers

• Prioritize items the IRS flagged first — supplying requested documents quickly often closes the case.
• Use PDF searchable scans with bookmarked sections for electronic submissions.
• Keep a simple audit folder year-round that includes receipts, mileage logs, and monthly reconciliations — this reduces scramble time if audited.
• For small businesses, reconcile bank statements monthly and label business vs. personal transactions.

Final checklist before you send

• Cover letter with taxpayer name, SSN (last 4), tax year, IRS notice number.
• Table of contents mapping IRS requests to attachments.
• Copies of the requested documents with annotations or highlights.
• Proof of delivery (tracking number or online transmission confirmation).
• Digital backup of everything you send.

Sources and further reading

• IRS, “Understanding IRS Audits” (irs.gov).
• IRS Publication 556, “Examination of Returns, Appeal Rights, and Claims for Refund”.
• Taxpayer Advocate Service, “Your Rights as a Taxpayer”.
• FinHelp: “Preparing a Document Packet for an IRS Correspondence Audit” and “How to Gather Records for an IRS Audit: A Step-by-Step Guide.” (internal links above)

Professional disclaimer: This article is educational and not a substitute for personalized tax advice. If your case involves complex legal or financial issues, consult a qualified tax professional or attorney.

By collecting the documents above, assembling them logically, and responding within the IRS deadline, you maximize the chances of a timely and favorable resolution to a correspondence audit.