Navigating the IRS Audit Process: What to Expect

What Should You Expect During an IRS Audit?

An IRS audit can be unsettling, but knowing the typical sequence and what the IRS looks for will help you respond confidently. Audits are administrative reviews — not criminal prosecutions — and most are resolved through documentation and explanation. This article explains the types of audits, the timeline, how to prepare your records, your rights, and practical steps I use when helping clients through an audit.

Quick overview: how audits are selected and why they matter

The IRS selects returns for audit in three main ways: computer screening (discrepancy or algorithmic risk scores), related examinations (matching issues across returns), and targeted campaigns (industry-specific or issue-specific reviews). Being audited doesn’t automatically mean wrongdoing; many audits are routine checks or follow-ups on specific items (see IRS audits overview: https://www.irs.gov/individuals/audits).

Why it matters: an audit can change your tax liability, result in penalties and interest, or in rare cases lead to criminal referral. Most audits, however, are resolved without severe consequences when taxpayers respond accurately and promptly.

Types of IRS audits (what you might face)

• Correspondence audit: The most common and least invasive. The IRS requests documents by mail about specific line items. Respond by sending copies — not originals — with clear labels.
• Office audit (in-person): You and/or your representative meet an IRS examiner at an IRS office to present records and answer questions.
• Field audit: An IRS agent visits your home, business, or accountant’s office to review records on site. This is more extensive and typically reserved for complex returns.
• Virtual audit: Increasingly common, especially post-2020; documents are exchanged electronically or via secure portals (see our guide on virtual audits: https://finhelp.io/glossary/what-to-expect-during-a-virtual-tax-audit-remote-documentation-tips/).

Step-by-step: What to expect during the audit process

1. Notification by mail

• The IRS initiates audits by mail. Expect a formal letter stating what tax year is under review, the type of audit, and the documents requested. The IRS will not initiate an audit by phone or email — warnings of scams are important (IRS warning on scams: https://www.irs.gov/newsroom/tax-scams-consumer-alerts).

1. Read the notice carefully

• Note deadlines, which items are under review, and the address for responses or the contact person. If you don’t understand, call the contact number on the notice or consult a tax professional before responding.

1. Gather and organize records

• Pull the specific documents the IRS requests and related support: receipts, invoices, bank statements, canceled checks, payroll records, 1099s, and a reconciliation memo tying the documents to the return.
• Use our step-by-step guide to assembling records: How to Gather Records for an IRS Audit: https://finhelp.io/glossary/how-to-gather-records-for-an-irs-audit-a-step-by-step-guide/.

1. Submit copies and a clear explanation

• Send organized copies, a table of contents, and a brief narrative that explains any unusual items. For correspondence audits, a well-prepared rebuttal packet can close the audit quickly (see Preparing a Rebuttal Packet: https://finhelp.io/glossary/preparing-a-rebuttal-packet-for-an-irs-correspondence-audit/).

1. Examiner review and follow-up

• The IRS examiner will review your submission and may ask for additional information. Respond on time. If more time is needed, ask the examiner in writing for an extension.

1. Closing the audit

• Outcomes include: no change, agreed adjustments (you accept proposed changes and pay or set up payment), or disagreed adjustments (you appeal). If you disagree, you can request the IRS Appeals Office or pursue tax court after administrative remedies are exhausted (see Appeals guidance: https://finhelp.io/glossary/tax-audit-appeals-how-to-prepare-for-the-appeals-conference/).

Timelines and statute of limitations

• Typical duration: Many correspondence audits resolve in 30–90 days; office and field audits often take several months depending on complexity.
• Statute of limitations: The IRS generally has three years from filing to assess additional tax. If you omit more than 25% of your gross income, that period extends to six years. There is no statute of limitations if the return is false due to fraud or if no return was filed (see IRS Publication 556: https://www.irs.gov/pub/irs-pdf/p556.pdf).

What records to keep and how to organize them

• Keep records that support income, deductions, credits, and basis.
• Minimum retention: keep most tax documents at least three years; keep documents supporting basis or capital transactions for as long as you own the asset plus the statute period mentioned above.
• Practical organization: create a binder or electronic folder with a table of contents, chronological ordering, and cross-references to tax return line numbers. In my practice I prepare a two-page summary that maps financial records to return lines — examiners appreciate the clarity.

Your rights, representation, and forms to know

• Taxpayer Rights: You have the right to professional and courteous treatment, representation, and to appeal. Review the Taxpayer Bill of Rights at the IRS website.
• Representation: You can represent yourself or appoint an authorized representative. Use IRS Form 2848 (Power of Attorney) to formally authorize a tax pro or attorney to negotiate and receive confidential tax information.
• Confidentiality: Send copies — never original documents unless specifically requested and agreed in writing.

Common audit triggers and mistakes to avoid

Common triggers include large or unusual deductions relative to income, unreported income, mismatched W-2/1099 forms, or high business expenses for a sole proprietor. Frequent mistakes taxpayers make:

• Waiting to respond to IRS notices (this escalates risk).
• Sending disorganized, unindexed records (adds time and friction).
• Speaking without a plan: let your representative or accountant prepare responses.
• Sharing sensitive information by unsecured email or phone — use secure delivery methods.

What to do if the IRS proposes changes you disagree with

1. Review the proposed changes and request an explanation in writing.
2. If you disagree, file a formal protest letter (required for some types of adjustments) and request Appeals — this preserves your administrative appeal rights.
3. Consider mediation or settlement discussions if appropriate. In my practice, a carefully documented protest plus a meeting with Appeals often resolves issues without litigation.

Scams and safety tips

The IRS will not call demanding immediate payment or threaten arrest. All initial audit contact is by mail. If you receive a suspicious call or email, report it and verify by contacting the IRS directly via published phone numbers (see IRS consumer alerts).

Practical checklist to prepare right away

• Do: Read the IRS notice and calendar the deadline.
• Do: Make copies of requested documents and create a one-page index.
• Do: Contact your tax preparer or hire one experienced with audits.
• Don’t: Send original documentation unless explicitly requested.
• Don’t: Ignore the notice — silence usually worsens the outcome.

Final thoughts from practice

In my work guiding clients through audits, preparation and communication consistently produce the best outcomes. Organize records as you go, keep calm, and use representation for complex or sensitive matters. Often, a concise explanation and clear documentation will close an audit with no change.

Authoritative sources

• IRS — Audits and Appeals: https://www.irs.gov/individuals/audits
• IRS Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund: https://www.irs.gov/pub/irs-pdf/p556.pdf
• IRS alerts on scams and consumer protections: https://www.irs.gov/newsroom/tax-scams-consumer-alerts

Professional disclaimer: This content is educational and does not constitute personalized tax, legal, or financial advice. Tax situations vary; consult a qualified tax professional or attorney before acting on information in this article.