Why this matters
An IRS field audit can be disruptive and costly if you’re unprepared. The IRS verifies that you reported rental income correctly and substantiated deductions such as repairs, insurance, interest, utilities, and depreciation. Being organized reduces audit time and the chance of adjustments or penalties (IRS Audits overview: https://www.irs.gov/businesses/small-businesses-self-employed/audits).

Quick checklist (what to gather first)

  • Signed leases and subleases for the audit years
  • Bank statements and deposit slips showing rent receipts
  • Rent ledgers or payment logs (digital or paper)
  • Expense receipts, contractor invoices, and canceled checks
  • Mortgage interest statements (Form 1098) and insurance bills
  • Depreciation schedules and Form 4562 copies
  • Property tax records and closing statements for purchases/sales
  • Proof of personal use days for any mixed-use property (calendars, travel records)
  • Prior tax returns and Schedule E worksheets

How to organize records (practical steps)

  1. Create a binder or digital folder per tax year. Label by category (Income, Repairs, Improvements, Insurance, Mortgage, Taxes, Depreciation).
  2. Use a cover sheet that lists documents included and page numbers for quick reference.
  3. Provide clear copies for the auditor; keep originals organized and available if requested.
  4. If you use property-management software, export reports to PDF and include a reconciled bank statement.

Common audit focus areas and how to defend them

  • Rent income: Match reported rent with bank deposits and lease terms. If some renters paid in cash, provide contemporaneous receipts or a signed rent receipt book.
  • Repairs vs. improvements: Repairs are generally deductible; improvements are capitalized and depreciated. Keep before/after photos, contractor descriptions, and receipts showing scope and cost to support repairs. See IRS guidance on capital vs. repair treatment.
  • Depreciation: Have the original purchase closing statement, depreciation schedule, and Form 4562. If you omitted depreciation or made errors, consider amending (see our guide: Amending a Return for Depreciation Errors on Rental Property: https://finhelp.io/glossary/amending-a-return-for-depreciation-errors-on-rental-property/).
  • Mixed-use/personal use: Maintain a daily log of personal use vs. rental days; apply the IRS personal-use rules when allocating expenses.

Record retention—how long to keep documents
Follow IRS recordkeeping guidance: generally keep records for at least three years from the date you file, but retain records for six years if you underreport income by more than 25%, or longer for fraud or unfiled returns. For rentals, keep purchase and depreciation records for as long as you own the property plus the statute of limitations for sale adjustments (IRS recordkeeping: https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping).

Communicating with the auditor (rights and best practices)

  • You may request that the audit take place at your CPA’s or attorney’s office.
  • You have the right to representation (CPA, EA, or attorney). If represented, direct all communications through them.
  • Provide only the documents requested. Don’t volunteer unrelated information.
  • Take notes of the auditor’s name, badge number, and the items requested. Ask for a list of issues in writing.
  • If the auditor asks you to sign a form, read it carefully — don’t sign blank forms.

On-site conduct and logistics

  • Designate one person to be the point of contact and to retrieve documents.
  • Offer a tidy workspace and copies of requested documents. Auditors often work faster when records are well organized.
  • Be cooperative but factual; don’t guess—if you don’t know, say you will verify and follow up.

After the visit—possible outcomes and next steps

  • No change: audit closed with no adjustments.
  • Proposed adjustment: you may receive a report of recommended changes; you can accept, provide more documentation, or dispute.
  • Appeals: If you disagree, you have appeal rights and can request a conference or file a formal appeal (IRS Pub 556: Examination of Returns, Appeal Rights, and Claims for Refund: https://www.irs.gov/pub/irs-pdf/p556.pdf).

Real-world tip from my practice
In my experience working with landlords, audits that start as one-issue (for example, a questioned repair) often expand if records are messy. A single, indexed binder per year reduces that risk and helps close the audit faster.

When to get professional help
Engage a CPA or tax attorney early if the audit involves large dollar adjustments, depreciation recapture, related-party transactions, or potential fraud allegations. If you need to correct a past mistake (e.g., missed depreciation), it’s often smarter to amend returns with professional help rather than wait for the audit to force changes. For help deciding which tax form to use for rental reporting, see our article on choosing the correct schedule for rental income (Schedule E vs Schedule C): https://finhelp.io/glossary/choosing-the-correct-schedule-for-rental-income-schedule-e-vs-schedule-c/.

Common pitfalls to avoid

  • Handing over disorganized paper bags of receipts.
  • Admitting personal use without proof to back allocation claims.
  • Letting an auditor take original documents without making certified copies.

Authoritative sources and further reading

Professional disclaimer
This content is educational and does not replace personalized tax advice. Tax rules change and facts matter; consult a qualified tax professional (CPA, EA, or tax attorney) for advice about your specific situation.