Preparing a Response Package for an IRS Correspondence Audit

Quick overview

An IRS correspondence audit is typically a letter asking for documentation about specific items on a previously filed return (for example, income mismatches or questioned deductions). The goal of your response package is simple: make it effortless for the IRS examiner to confirm or correct the item(s) in question. In my 15 years helping clients through correspondence audits, the single biggest factor that speeds resolution is a clear cover letter and documents organized in the same order the IRS listed them.

(Authoritative context: See IRS, “Understanding Your Audit” for what to expect from correspondence audits: https://www.irs.gov/individuals/understanding-your-audit.)

Step-by-step checklist to build your response package

Follow this practical sequence. I use it with clients to keep responses consistent and defensible.

1. Read the IRS letter carefully

• Note the letter number (top-right corner) and the deadline. Each IRS notice typically includes an explanation of the issue and a date by which they expect a reply. Do not miss this deadline — it can limit appeal options.

1. Make a copy of everything you send

• Keep a complete duplicate (paper or scanned PDF) of the package you will mail or upload. Date-stamp the copy if possible.

1. Gather the core documents

• The filed tax return for the year under review.
• Forms that show income: W-2s, 1099‑MISC/NEC, 1099‑INT, 1099‑DIV, 1099‑B, K-1s
• Bank statements, invoices, receipts, canceled checks, contracts, ledger summaries, and other contemporaneous records supporting the amounts reported.
• Any employer payroll records or corrected forms (e.g., corrected 1099).

1. Create a concise cover letter

• See the sample cover letter below. Your letter should identify the IRS letter number, list enclosed documents, and explain how the documents address each IRS question.

1. Number and tab the documents

• Label pages with a cover page that lists tabs: Tab 1 = Tax Return; Tab 2 = W-2s; Tab 3 = Receipts for deduction X, etc. Keep the order the same as the IRS items appear.

1. Prepare an item-by-item response table (recommended)

• A one-page table that maps IRS item numbers to documents you’re sending (e.g., Item 1: Schedule C receipts — see Tab 4, Pages 3–12) saves time for the examiner.

1. Decide how to send it

• If the IRS letter instructs to use a secure portal, follow that route. Otherwise, send by U.S. Postal Service with tracking and request return receipt or use certified mail. Keep proof of mailing. (The IRS acknowledges paper responses by processing dates; proof of timely mailing is your best protection.)

1. Consider professional help

• For complex items (large adjustments, partnership allocations, potential penalties), consult a CPA, enrolled agent, or tax attorney. If you have representation, include Form 2848 (Power of Attorney) so the professional can deal with the IRS directly.

How to write an effective cover letter (template)

Your cover letter is the first thing the examiner reads — write it to be short, factual, and roadmap-style.

Sample cover letter (adapt to your facts):

[Taxpayer name]
[Taxpayer SSN or EIN — last 4 digits only]
[IRS notice ID: e.g., CP2000 or letter number]
[Tax year in question]

Dear Examiner,

Enclosed please find the documents requested in your [date] letter (Notice [number]). The materials are organized to match the item numbering in your notice. Below is a brief index of the enclosed tabs and how they address each item.

Tab 1 — Copy of filed Form 1040 (Tax Year XXXX)
Tab 2 — W-2 from Employer ABC (verifies wages listed on Form 1040)
Tab 3 — 1099‑NEC and invoice summaries (self‑employment income; see pages 1–6)
Tab 4 — Receipts and bank statements supporting Schedule C deductions (vehicle log on page 4)

If you need any additional information or verifications, please contact me at [phone] or [email]. Thank you for your attention to this matter.

Sincerely,

[Taxpayer signature & printed name]

Organizing tips that save time and reduce errors

• Mirror the IRS letter order: If the notice lists three items, present your evidence in that same sequence and reference the IRS item numbers.
• Use a simple index: Page numbers, tab labels, and a one-page mapping table reduce back-and-forth requests.
• Highlight key lines: If sending a long bank statement or invoice, use a highlighter or include a short sticky-note-style page indicating the relevant lines. Examiners appreciate direct pointers.
• Limit extraneous pages: Only include documents that relate to the items under review. Too many unrelated pages can slow processing.

Handling common document types and reconciliation

• Income mismatches (W-2s/1099s): Provide the original forms you received and any corrected forms (W‑2c, corrected 1099). If a third party reported income incorrectly, attach your correspondence with that payer showing you requested correction.
• Deductions (Schedule C, charitable, business expenses): Use contemporaneous receipts, mileage logs, invoices, and bank records. For vehicle use, a dated mileage log is better than memory-based estimates.
• Missing forms: If the IRS shows third-party forms you did not receive, first contact the payer to request a copy. If you cannot obtain it, include a written explanation and any supporting records.

(Reference: IRS guidance on taxpayer rights and audits, Publication 1: Your Rights as a Taxpayer — https://www.irs.gov/pub/irs-pdf/p1.pdf.)

Deadlines, evidence standards, and follow-up

• Respond by the date on the notice. If you need more time, you can call the phone number on the notice to request an extension; the IRS may grant a short extension in limited circumstances.
• Be factual and avoid volunteering extra information that leads to new review items.
• Keep a written log of all contacts with the IRS (date, name, badge number, summary). This can help if you later need to appeal or show your diligence.

When to amend your return or attach an explanatory statement

• If you discover you omitted an item or made a math error, you may choose to submit an amended return (Form 1040‑X) or make a statement in your response explaining the correction. If an error will increase tax, attach a proposed corrected computation and consider including payment or an installment arrangement to avoid penalties and interest.

When to involve a tax professional

• If the IRS alleges fraud, substantial underreporting, large penalty exposure, or the issues involve complex partnership or corporate allocations, engage an enrolled agent, CPA, or tax attorney immediately.
• If you retain a representative, include a completed Form 2848 (Power of Attorney) so your representative can handle calls and negotiate on your behalf.

(For representation rules and forms, see IRS Form 2848 and accompanying instructions on irs.gov.)

Common mistakes to avoid

• Sending unsorted, unindexed documents that force the examiner to dig for answers.
• Failing to include the IRS notice number or tax year on your cover letter.
• Omitting copies and proof of mailing.
• Volunteering broad additional information unrelated to the item — this can expand the scope of review.

Real-world example

A sole proprietor received a correspondence audit questioning Schedule C deductions for subcontractor payments. We assembled a package with the filed return (Tab 1), 1099‑NEC copies (Tab 2), invoices and subcontractor contracts (Tab 3), and bank payment records (Tab 4). The one-page mapping table referenced the specific IRS item numbers and pages in each tab. The examiner agreed the payments were legitimate business expenses and closed the case without adjustment. Clear mapping and contemporaneous records resolved the inquiry in three weeks.

Useful internal resources

• See our checklist on records to gather for a correspondence audit: “Preparing for an IRS Correspondence Audit: Records to Gather” (internal guide) — https://finhelp.io/glossary/preparing-for-an-irs-correspondence-audit-records-to-gather/
• Read our recordkeeping best practices to avoid future audits: “Recordkeeping Best Practices to Survive an IRS Audit” — https://finhelp.io/glossary/recordkeeping-best-practices-to-survive-an-irs-audit/
• For building a durable audit file, see: “Building an Audit File: Documents That Strengthen Your Case” — https://finhelp.io/glossary/building-an-audit-file-documents-that-strengthen-your-case/

Frequently asked questions

Q: Can I fax or email the response?
A: Only use the method specified on the IRS letter. Some letters list a fax or secure portal; most require postal mail. If unsure, call the number on the notice and confirm.

Q: How long will the IRS take to review my package?
A: Review time varies. Simple correspondence audits can close in 30–90 days; complex items may take longer. Proof of timely mailing preserves your rights if deadlines matter.

Q: What if the IRS changes its position after my response?
A: The IRS must notify you of adjustments and explain appeal rights. If you disagree with an adjustment, you can use administrative appeals or request a conference (see our guide on appeals options: https://finhelp.io/glossary/appeals-options-after-an-audit-adjustment-administrative-remedies/).

Professional disclaimer

This article is educational and does not constitute tax or legal advice. For personalized guidance, consult a qualified tax professional or attorney familiar with your facts and the tax year in question.

Author note

In my practice as a CPA and financial educator, organizing documents to align directly with the IRS notice reduces examiner back-and-forth and shortens resolution time. Start assembling your package as soon as you receive the notice; good records make the audit process manageable and often straightforward.

(IRS sources referenced: “Understanding Your Audit” — https://www.irs.gov/individuals/understanding-your-audit; Publication 1: “Your Rights as a Taxpayer” — https://www.irs.gov/pub/irs-pdf/p1.pdf.)