Overview
Receiving an audit or examination notice from the IRS can be stressful, but the notice itself simply starts a process: the IRS asking for clarification or proof of reported items. Notices vary from simple correspondence requests to full field audits. Most are resolved after you provide clear, organized documentation.
Why you might get a notice
Common reasons include: mismatched income reported by employers or third parties, unusually large deductions compared with your income, math errors, or random selection by IRS data systems. Some audits come from third-party information (W‑2s, 1099s) that doesn’t match your return, while others stem from targeted compliance programs. (See IRS guidance on audits and examinations: https://www.irs.gov/businesses/small-businesses-self-employed/audits)
Types of IRS audit notices
- Correspondence audit: the IRS requests documents by mail about specific items.
- Office audit: you meet with IRS staff at an IRS office to discuss items.
- Field audit: an IRS agent visits your home, business, or your representative’s office to review records.
What the notice will tell you
Every notice or letter should state: why the IRS is contacting you, what documents or explanations it wants, a deadline for your response, and contact information. Read the notice carefully—different notices have different deadlines and instructions. If anything is unclear, contact the IRS phone number on the notice or consult a tax professional.
Step-by-step response checklist
- Pause and read, not panic
- Note the notice date, deadline, and any item codes listed on the letter. Most correspondence audits request materials within 30 days, but timings vary.
- Verify authenticity
- Scammers sometimes impersonate the IRS. A legitimate notice will include an IRS address and contact phone number; the IRS will not demand immediate payment via gift cards or threaten arrest. See IRS guidance on official notices: https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter
- Gather and organize documents
- Collect source documents (receipts, bank statements, invoices, payroll records, W‑2s/1099s). Create a simple index or table of contents so reviewers can follow your package. My clients who prepare a one‑page index settle audits faster.
- For help on document practices, see our guide: Document Retention Best Practices to Survive an Audit (https://finhelp.io/glossary/document-retention-best-practices-to-survive-an-audit/).
- Draft a clear cover letter
- Briefly explain what you’re sending and reference the IRS notice number and the tax year. Label each document and match it to the IRS requests.
- Decide on representation
- You can represent yourself, but many taxpayers hire a CPA, enrolled agent (EA), or tax attorney. If you prefer professional representation, execute IRS Form 2848 (Power of Attorney) so your representative can communicate directly with the IRS: https://www.irs.gov/forms-pubs/about-form-2848.
- Submit and track your response
- Send copies (not originals) by secure mail or via your practitioner. Keep certified mail receipts or delivery confirmations and maintain electronic backups. Consider preparing a compact audit package — a concise packet that directly addresses the items requested: https://finhelp.io/glossary/preparing-a-compact-audit-package-what-to-include/.
- If you disagree, know your appeal options
- If the IRS proposes changes you disagree with, you can often appeal within the IRS Appeals Office or pursue Tax Court where applicable. Our practical walkthrough explains the appeals path: How to Appeal an IRS Audit (https://finhelp.io/glossary/how-to-appeal-an-irs-audit-from-irc-6213-notices-to-tax-court/).
Typical outcomes and timelines
Many correspondence audits end after the IRS accepts the documents you submit; others may result in agreed adjustments or additional tax owed. The IRS generally has three years from the filing date to assess additional tax, six years for substantial omissions, and no statute of limitations for fraud or when no return is filed.
Common mistakes to avoid
- Waiting until the deadline: respond promptly and request reasonable extensions if needed.
- Sending disorganized records: use an index and label items to match the IRS’s requests.
- Over-sharing irrelevant documents: only provide what’s requested unless your representative advises otherwise.
Practical tips from practice
In my work helping individuals and small businesses, a short, well-organized packet with a one‑page summary often closes correspondence audits faster than a large, unindexed collection of papers. For small businesses, maintaining routine recordkeeping and using simple bookkeeping tags for tax categories reduce both audit risk and the time needed to respond.
When to seek professional help immediately
- The notice alleges fraud or substantial underreporting.
- The IRS wants to examine your place of business or conduct a prolonged field audit.
- You receive a Notice of Deficiency (90-day letter) or a summons.
Authoritative sources
- IRS, Audits and Examinations: https://www.irs.gov/businesses/small-businesses-self-employed/audits
- IRS, Understanding your IRS notice or letter: https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter
- IRS, About Form 2848 (Power of Attorney): https://www.irs.gov/forms-pubs/about-form-2848
Professional disclaimer
This content is educational and does not replace personalized tax advice. For advice specific to your situation, consult a licensed tax professional, enrolled agent, or tax attorney.
Related FinHelp resources
- Document Retention Best Practices to Survive an Audit: https://finhelp.io/glossary/document-retention-best-practices-to-survive-an-audit/
- Preparing a Compact Audit Package: What to Include: https://finhelp.io/glossary/preparing-a-compact-audit-package-what-to-include/
- How to Appeal an IRS Audit: From IRC 6213 Notices to Tax Court: https://finhelp.io/glossary/how-to-appeal-an-irs-audit-from-irc-6213-notices-to-tax-court/
