Preparing a Document Packet for an IRS Correspondence Audit

Quick overview

Preparing a document packet for an IRS correspondence audit means assembling clear, well-labeled copies of the records the IRS requests so an examiner can verify specific items on your return without extra follow-up. In my practice guiding small-business owners and individual taxpayers, a professionally organized packet often shortens the audit timeline and reduces the odds of an unfavorable adjustment.

Why organization matters

Examiners process thousands of correspondence audit replies. A packet that includes a one-page cover letter, a table of contents, and numbered exhibits helps the agent find and verify information quickly. That reduces follow-up letters and keeps the review focused on facts rather than format.

Step-by-step checklist to build the packet

Follow this sequence to create a packet an IRS examiner can evaluate at a glance.

1. Read the IRS notice carefully

• Verify the letter type and the specific items requested. The IRS correspondence notice will identify the tax year, the return line(s) in question, and any forms or specific documents the examiner wants. Always follow the deadline printed on the notice—most correspondence audits allow about 30 days to respond, but the notice controls (IRS, Examination of Returns, Pub. 556).

1. Make a short cover letter

• Identify the taxpayer (name, SSN last four digits), tax year, and the IRS notice number shown on the top of the letter. State you are responding to a correspondence audit and briefly list the attachments (e.g., “Attached: 1. Table of Contents; 2. Copy of Form 1040, page 2; 3. Bank statements, Jan–Dec 2023; 4. Receipts for charitable contributions.”). Sign and date the letter.

1. Create a one-page table of contents and exhibit index

• Number each exhibit and note page ranges. Example: Exhibit 1 — Form 1040 (pages 1–3); Exhibit 2 — Charitable donation receipts (pages 4–18). This index is the map the examiner will use.

1. Include a highlighted copy of the tax return

• Copy the return and highlight the exact lines questioned. Add a brief explanatory note beside each highlighted line that references the supporting exhibit numbers.

1. Assemble supporting documents (copies, not originals)

• Typical documents: receipts, invoices, bank and credit card statements, canceled checks, pay stubs, brokerage statements, Form 1099s, K-1s, and contracts. The IRS generally asks for copies; do not send originals unless they explicitly request them. (See IRS recordkeeping guidance.)

1. Add contextual documentation

• If an expense needs a business purpose (Schedule C travel, meals, or mileage), include logs, calendars, client emails or contracts, and itineraries. For charitable gifts, include donation receipts showing the organization’s name, date, amount, and proof of cash/noncash contributions.

1. Provide reconciliations and math

• If an item aggregates many transactions (e.g., total charitable deductions from PayPal or multiple checks), include a one-page reconciliation that summarizes how the total was calculated and points to the source documents.

1. Label, paginate, and tab

• Number every page in the footer (Page 1 of 32) and use divider tabs for exhibits. This is helpful for both paper and scanned PDF submissions.

1. Redact sensitive information and keep privacy in mind

• Redact full Social Security numbers, bank account numbers, and similar sensitive data on the copies you send; leave the last 4 digits visible for identification. The IRS needs enough information to confirm identity but you should avoid sharing full account numbers unless required.

1. Make working copies and proof of delivery

• Keep a complete set of what you send and record the delivery method. For mailed packets, use certified mail with return receipt or the U.S. Postal Service’s tracking. If using a tax pro, authorize them with Form 2848 (Power of Attorney) so they may correspond on your behalf (IRS Form 2848).

File formats and electronic submissions

The IRS correspondence program is primarily paper-based, but some examination teams accept scanned PDFs. If you scan and email to an assigned fax number or upload via an IRS secure portal, confirm the acceptable formats and file size limits in the notice or with your assigned examiner’s contact information. Never email unencrypted scanned copies of sensitive documents to unknown addresses.

What to include for common audit topics

• Charitable contributions: written receipts from the charity, bank/credit card records showing the payment, acknowledgment letters for gifts $250 or more. (IRS rules for charitable contribution substantiation.)
• Business expenses (Schedule C): invoices, client contracts, mileage logs, credit card and bank statements, and appointment calendars showing business purpose.
• Unreported income: all 1099s, bank deposit detail, invoices, and client statements that explain deposit sources.
• Credits and deductions (education, child tax credits, etc.): forms 1098-T, receipts for qualified expenses, custody agreements if applicable.

How to format a strong cover letter (example elements)

• Reference the IRS notice number and tax year
• State what you are providing and how it maps to the requested items
• Offer a single contact person (you or your tax pro) with daytime phone and email
• Ask for confirmation of receipt and state how you will follow up

Common mistakes to avoid

• Sending originals without request. Keep originals safe and send copies.
• Overloading with irrelevant information. Provide requested items plus clear supportive evidence, not an entire year’s file dump.
• Missing deadlines. Respond promptly—timelines on notices are binding.
• Poor indexing. If the examiner cannot easily find the documents, they may make assumptions that lead to adjustments.

Practical pro tips from experience

• In my practice I prepare a one-page executive summary for every packet that calls out the questioned lines, the taxpayer’s position, and the exhibits that prove it. Examiners appreciate concision.
• Use color tabs or a simple two-color system when sending larger packets: red for the return and highlighted lines, blue for supporting documents.
• When expenses involve travel, keep the calendar or itinerary paired with receipts and a short statement of business purpose; that trio resolves most travel-related questions.

If the IRS proposes an adjustment

• If the examiner responds with a proposed adjustment, you generally have appeal rights. Follow the response instructions and timelines in the examiner’s letter. Consider engaging a CPA or tax attorney—if you expect complex issues, a formal appeal or conference with the IRS Appeals Office may be appropriate. See IRS Publication 556 for exam and appeal procedures.

When to involve a professional

• If the dollar amounts are large, multiple years are under review, or you suspect criminal exposure, immediately consult a tax attorney or an experienced CPA. Also, if the IRS requests extensive original documents or interviews, professional representation reduces risk and procedural errors.

Related FinHelp resources

• For guidance on structuring a rebuttal if the IRS challenges your submission, see our piece on Preparing a Rebuttal Packet for an IRS Correspondence Audit. This article shows examples of cover letters and exhibit indexing.
• For general document organization techniques that apply to both correspondence and field audits, read How to Organize Supporting Documentation for a Tax Audit.
• To understand what to expect after you submit your packet, our guide What to Expect During an IRS Correspondence Audit outlines typical examiner actions and timelines.

Recordkeeping timelines and retention

• For most taxpayers, keep records for at least three years after the date you filed or the due date of the return, whichever is later. The IRS suggests keeping records longer in certain situations—six years for substantial understatement (more than 25% of gross income), and indefinitely for fraud or unfiled returns. See IRS guidance on recordkeeping for specifics (IRS: How long should I keep records?).

Final checklist before mailing or uploading

• Cover letter with contact information
• Table of contents and exhibit index
• Highlighted copy of the return with cross-references
• All requested supporting documents, reconciliations, and summaries
• Copies only (unless otherwise requested)
• Copies retained for your files
• Proof of delivery (tracking, certified mail, or portal confirmation)

Disclaimer

This article explains general practices for preparing document packets for IRS correspondence audits and references public IRS guidance (IRS Publication 556 and IRS recordkeeping resources). It is educational in nature and not individualized tax advice. For recommendations tailored to your situation, consult a qualified tax professional or tax attorney.

Authoritative sources

• IRS, “Examination of Returns” (Publication 556): https://www.irs.gov/pub/irs-pdf/p556.pdf
• IRS, “Audits” overview and correspondence audit guidance: https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits
• IRS, “How long should I keep records?”: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records