Quick summary

Field audits are on-site examinations that dive deeper than correspondence audits. They often target businesses, self-employed taxpayers, or returns with complex items. A successful outcome requires clear records, calm communication, and—if needed—professional representation. This guide explains what happens during a field audit, practical preparation steps, typical timelines, common pitfalls, and your options for representation and appeals.

How field audits work (step-by-step)

  1. Notice and initial contact
  • The IRS usually sends a written audit notice (example: CP49 or a similar letter) that explains the scope, the tax years under review, and the next steps. State tax agencies use similar letters. Do not ignore the letter; it starts deadlines and shows the auditor’s focus.
  1. Scheduling and scope confirmation
  • The auditor will propose a date for the on-site visit and a list of documents to have available. Expect follow-up requests; the auditor may expand or narrow the scope after an initial review.
  1. On-site review
  • The auditor examines books, receipts, ledgers, tax returns, contracts, and electronic records. They may interview owners, employees, or tax preparers. An on-site visit allows the auditor to verify operations, inventory, and business practices directly.
  1. Fieldwork and research
  • After the visit, the auditor completes analyses, compares records to reported amounts, and may ask for clarifications or additional documents.
  1. Findings and proposed adjustments
  • If the auditor finds issues, you’ll receive a report or a proposal for adjustments. That document explains changes, the basis, and any additional tax, penalties, and interest.
  1. Resolution or appeal
  • You can accept the findings and pay or arrange payment, or you can request an appeal or discuss the case with the auditor or their manager. Publication 556 explains appeal rights and procedures in detail (IRS Pub. 556).

Sources: IRS audits guidance and Publication 556 (IRS.gov).

Who typically faces a field audit?

  • Small and medium business owners with complex accounting.
  • Self-employed and gig-economy workers with high expense ratios.
  • High-income taxpayers with large credits or unusual itemized deductions.
  • Taxpayers with inconsistent reporting between income statements, bank records, and third-party forms (W-2s, 1099s).

In my practice working with clients for over 15 years, field audits most often fall on small-business clients with inventory issues, distressed contractors, and independent consultants who claim substantial travel or home-office expenses.

What to expect during the on-site visit

  • Identification and scope confirmation: The auditor presents credentials. Verify their identity by asking for official ID and the contact number for the local IRS or state office (do not call a number supplied on the spot; use the main IRS number or the one on the agency website).
  • A review of records: The auditor will request original documents and may copy or scan records. Expect requests for receipts, bank statements, invoices, canceled checks, payroll records, and detailed ledgers.
  • Interviews: The auditor may interview you, bookkeepers, or employees. Keep answers factual and succinct.
  • Temporary removal of records: Auditors generally do not remove records off-site without written agreement. If you agree, get a receipt and a clear return date.

Caution: Never volunteer extra information beyond what is requested. Stick to the documents and facts relevant to the scope outlined in the notice.

Practical preparation checklist (what to have ready)

  • A clean, indexed file of the tax year(s) under audit, with a table of contents or binder tabs.
  • Income documentation: bank deposits, 1099s, W-2s, daily sales logs, third-party payment processor reports (Stripe, PayPal), and merchant statements.
  • Expense documentation: receipts, invoices, canceled checks, credit card statements, payroll records, lease agreements, and mileage logs.
  • Fixed-asset and inventory records: purchase invoices, depreciation schedules, inventory counts, and cost-of-goods-sold worksheets.
  • Accounting reconciliations: bank reconciliations, general ledger summaries, and trial balances.
  • Personal vs. business separation: clear documentation proving business purpose for claimed expenses (contracts, client invoices, calendars, and contemporaneous notes).
  • Representative paperwork: Form 2848 (Power of Attorney) if you’ll have a CPA or attorney represent you in meetings (IRS Form 2848: https://www.irs.gov/forms-pubs/about-form-2848).

Tip from experience: Create a one-page executive summary that lists the key records and where to find them. Auditors appreciate organized files and it shortens the audit.

Common triggers and red flags

  • Large, unusual, or poorly documented deductions (especially travel, meals, and entertainment).
  • Significant discrepancies between bank deposits and reported income.
  • Schedule C losses year after year without evidence of profit motive.
  • Mismatches between Forms 1099/W-2 and what was reported on returns.
  • Excessive business use of personal assets without clear allocation.

These triggers are discussed in broader context in our guide on What Triggers an IRS Audit for Small Business Owners and in Understanding IRS Audits: Types, Process, and Outcomes.

Internal resources: see our pages on Preparing for a Field Audit: Documentation and Interview Tips, Recordkeeping Best Practices to Survive an IRS Audit, and Understanding IRS Audits: Types, Process, and Outcomes.

Common mistakes to avoid

  • Providing excessive records that aren’t requested — this can expand the audit’s scope.
  • Missing deadlines or failing to follow submission instructions.
  • Speaking to the auditor without a clear record or in the absence of your tax advisor when complex legal questions arise.
  • Letting emotion replace documentation — keep conversations factual and documented.

Negotiation, resolution, and appeals

If the auditor proposes adjustments, you can:

  • Agree and arrange payment or an installment plan.
  • Request a meeting to explain additional documentation or reconcile differences.
  • File a formal appeal if you disagree with the proposed changes. IRS Publication 556 describes appeal rights and administrative remedies; you can also request a manager review or take the case to the IRS Office of Appeals.

In practice, many disputes resolve through better documentation or negotiation with the auditor’s manager. Formal appeals remain an essential option if material tax liability is at stake.

Timeline and how long a field audit lasts

Field audits are typically longer than correspondence exams. An initial on-site visit may last a few hours to several days depending on complexity. The entire audit—from notice to closing—often spans several weeks to many months. Complex business audits can take 6–12 months or longer if appeals follow.

Costs and when to hire a professional

Hiring a CPA, enrolled agent, or tax attorney is advisable when:

  • The audit involves complex accounting, substantial proposed adjustments, or potential criminal exposure.
  • You prefer representation in interviews and negotiations.
  • You lack the time or systems to compile and explain the requested documents.

A representative can prepare a professional response package, attend interviews, and limit communications to formal channels. Use Form 2848 to designate a representative.

Sample script for the initial meeting (stay concise and factual)

  • “I have these organized files by category; how would you like them presented?”
  • “For question X, I can provide the original receipts and a reconciliation to the tax return.”
  • “I’m represented by [firm name]; please direct questions to my representative.”

FAQs (brief answers)

Q: Can the auditor take my records?
A: Generally, auditors will copy or scan records at your location. They should not remove originals without a written agreement and a receipt.

Q: Will a field audit always lead to additional tax?
A: No. Many audits confirm the original return, or they result in minor adjustments.

Q: Can I record interviews with the auditor?
A: Recording laws vary by state. Ask the auditor if they consent to recording, or have your representative present and take written notes.

Professional disclaimer

This article is educational and does not constitute tax advice. For personalized guidance on a specific field audit, consult a licensed CPA, enrolled agent, or tax attorney. Official IRS guidance on audits is available at the IRS website and in Publication 556 (see below).

Authoritative sources

For additional practical steps on documentation and sample response packages, see our related guides linked above. Preparing carefully and working with an experienced representative when needed will reduce stress and improve audit outcomes.