Overview

An IRS examination (audit) is a review of your tax returns and records to verify accuracy and compliance. Proper preparation reduces stress, shortens the review, and often limits additional tax, penalties, and interest (IRS Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund, https://www.irs.gov/pub/irs-pdf/p556.pdf).

Quick checklist (first 48–72 hours)

  • Read the IRS notice carefully and note deadlines. The IRS initiates contact by mail—never by unscheduled phone calls demanding payment.
  • Don’t panic or admit errors in writing. Acknowledge receipt and request time to gather records if needed.
  • Decide who will communicate with the IRS. If you’ll use a tax professional, file Form 2848 (Power of Attorney) so they can represent you (irs.gov/forms-pubs/about-form-2848).

Documents to gather (start here)

  • Tax returns for the year(s) under review and the prior three years.
  • General ledger, bank statements, credit-card statements, and reconciliations.
  • Invoices, receipts, and vendor contracts tied to claimed deductions.
  • Payroll records, Form W-2s, 1099s, and supporting contractor agreements.
  • Inventory records, depreciation schedules, and fixed-asset receipts.
  • Loan documents, lease agreements, and insurance records.
  • Documentation of cash transactions and evidence for estimated tax payments.

How to assemble the package

  • Use a clear index and label files by tax year and topic (income, expenses, payroll, assets).
  • Provide summarized schedules that tie back to specific return line items (e.g., “Office supplies — Schedule A, p.3”).
  • If sending electronically, follow the IRS guidance for digital file formats and organization. See our guide to creating a digital audit package for best practices: “Preparing a Digital Audit Package: Organizing Electronic Records for the IRS” (https://finhelp.io/glossary/preparing-a-digital-audit-package-organizing-electronic-records-for-the-irs/).

Common audit types and what they request

  • Correspondence audit: IRS asks for specific documents by mail. Respond in writing by the due date.
  • Office audit: You meet an IRS reviewer at a local office—bring originals and organized copies.
  • Field audit: An IRS agent visits your place of business and may review books on-site.

Timeline and statute of limitations

Communicating with the IRS

  • Keep all correspondence copies and use Certified Mail or a document tracking method when sending materials.
  • Be concise and factual. Avoid volunteering unrelated information.
  • If you don’t understand an item requested, ask for clarification in writing.

When to involve a professional

  • Bring a CPA, EA, or tax attorney when issues are complex, penalties are likely, or potential criminal exposure exists. For guidance on when to add a practitioner to your audit team, see: “When a Tax Practitioner Should Be Added to Your Audit Team” (https://finhelp.io/glossary/when-a-tax-practitioner-should-be-added-to-your-audit-team/).
  • A representative can handle communications, attend meetings, and negotiate on your behalf (file Form 2848 to authorize representation).

Rights and appeals

Common mistakes to avoid

  • Sending unorganized or incomplete records.
  • Ignoring deadlines or the initial letter.
  • Discussing the audit on social media or with non-authorized parties.

Final practical checklist (before sending records or meeting the auditor)

  • Create a cover letter that lists enclosed documents and the point of contact.
  • Number pages and include a table of contents or index.
  • Highlight or annotate records that directly support the disputed return items.
  • Keep originals secure; provide copies unless the IRS specifically requests originals.
  • Track all shipping and delivery receipts and maintain a response log of dates and contacts.

Useful authoritative references

Professional disclaimer

This article is educational and does not constitute tax advice. For tailored guidance, consult a qualified tax professional or attorney about your specific circumstances.

In my practice over 15 years, businesses that prepare an indexed, annotated audit package and engage a representative early routinely shorten the process and reduce adjustments and penalties.