Surviving an IRS Field Audit: Step-by-Step Preparation

How can I prepare for an IRS field audit step by step?

An IRS field audit is an in-person review of your records at your place of business or home. These audits are often more thorough than correspondence audits because the agent has direct access to original documents and can interview personnel. Proper, methodical preparation is the best way to reduce stress, limit liabilities, and speed resolution.

Below is a step-by-step framework I use in practice with clients facing a field audit. It blends practical recordkeeping, legal protections, and communication strategies. (This is educational information — consult a qualified tax professional for case-specific advice.)

Before the Agent Arrives: Immediate steps (Day 1–7)

1. Read the notice carefully and confirm scope

• Identify the tax years and issues listed. The IRS notice will state whether the audit covers income, deductions, credits, or a specific schedule. (See IRS overview: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-audits)
• Note deadlines and the name and contact information of the IRS agent.

1. Do not panic — preserve originals and make copies

• Do not throw anything away. Keep originals intact; provide copies when requested. Originals may be inspected on-site, but keep your master files organized and secure.

1. Consider professional representation immediately

• If the audit involves complex issues (partnerships, substantial deductions, payroll, foreign accounts), hire a CPA, enrolled agent (EA), or tax attorney to represent you. An authorized representative can speak for you and limit direct interactions with the agent.

1. Confirm logistics and scope in writing

• Call the agent (or their supervisor) to confirm the appointment date and the list of documents they intend to review. Ask for clarification on any vague request to avoid surprises.

Document collection and organization (Days 2–14)

5. Assemble a prioritized document packet

Collect these core documents for each year under review:

• Filed tax returns and all schedules
• General ledger and accounting software exports
• Bank statements and deposit slips
• Receipts and invoices supporting deductible expenses
• Payroll records, Form W-2s and 1099s
• Contracts, leases, loan agreements, and cancellation documents
• Subsidiary ledgers (fixed assets, inventory)
• K-1s, partnership agreements, and corporate minutes
• Home-office calculations and supporting use logs

Cite IRS guidance on record retention and types of acceptable documentation (IRS Publication 552: Recordkeeping; https://www.irs.gov/forms-pubs/about-publication-552).

6. Create a navigator index and summary memo

• Build a one-page index per tax year that lists each item the agent may request and where it’s located (e.g., “Meals & Entertainment: receipts folder > 2019 > tab 3”).
• Draft short narrative memos explaining large or unusual transactions. These memos help the agent verify items quickly and show good-faith documentation of business purpose.

6. Reconcile key figures before the meeting

• Reconcile bank deposits to reported income, match invoices to deposits, and reconcile gross receipts to tax return totals. Identify and explain variances in advance.

Day-of Audit: On-site conduct and tactics

8. Manage the environment

• Provide a clean, private workspace and copies rather than originals when possible. If the agent requests originals, document each item returned.
• Limit access to sensitive unrelated files. Keep the review focused on requested items.

8. Communicate clearly and professionally

• Be truthful, concise, and direct. If you don’t know an answer, say you will provide the documentation and follow up.
• If you have representation, let the agent know up front that your representative will handle all substantive communication.

8. Take careful notes and log requests

• Record the agent’s name, badge number, date/time, the specific documents reviewed, and any statements the agent makes about potential adjustments. These notes are critical if you appeal later.

8. Don’t volunteer extra information

• Answer only the questions asked. Avoid over-explaining or offering unrelated documents that could broaden the audit scope.

After the Audit: Responding to findings and resolving disputes

12. Review the agent’s findings and proposed adjustments

• Expect a report or a list of proposed changes. Your representative should review the math and legal basis carefully.

12. Provide supplemental documents promptly

• If the agent requested additional documents, produce them on the agreed timeline and update your navigator index.

12. Understand your rights and the appeals process

• You have the right to challenge the IRS’s findings and to appeal an audit determination. The Taxpayer Bill of Rights and IRS appeals information explain protections and options (IRS Taxpayer Bill of Rights: https://www.irs.gov/taxpayer-bill-of-rights).

12. If you disagree, use available remedies

• Consider the IRS Appeals Office, a Collection Due Process hearing, or, in rare cases, federal court. An experienced tax attorney or CPA can map the best route.

Practical recordkeeping habits to avoid future audits

• Keep complete, dated receipts and short-purpose notes for meals, mileage logs, and home-office use.
• Reconcile monthly and keep a searchable digital archive; scan originals and store them with clear filenames.
• Follow IRS retention guidance—generally 3 years from filing, longer for omitted income or fraud (see Publication 552).

Further reading: If you need a focused checklist, see our Preparing for a Field Audit: Documentation Checklist and Best Practices for Recordkeeping to Survive an Audit. For business financials, review How to Prepare Financial Statements for an IRS Field Audit.

• Preparing for a Field Audit: Documentation Checklist: https://finhelp.io/glossary/preparing-for-a-field-audit-documentation-checklist/
• Best Practices for Recordkeeping to Survive an Audit: https://finhelp.io/glossary/best-practices-for-recordkeeping-to-survive-an-audit/
• How to Prepare Financial Statements for an IRS Field Audit: https://finhelp.io/glossary/how-to-prepare-financial-statements-for-an-irs-field-audit/

(See related FinHelp resources above for templates and downloadable indexes.)

Common mistakes I see in practice and how to avoid them

• Giving the agent unfettered access to unrelated records. Solution: provide only requested folders and document returns.
• Waiting to reconstruct records after receiving a notice. Solution: keep contemporaneous records and reconcile regularly.
• Failing to hire representation for complex issues. Solution: retain an experienced EA, CPA, or tax attorney early.

Real-world example: A client I worked with was audited after a bank-deposit vs. reported-income mismatch. By preparing a reconciled deposit schedule, supporting invoices, and a short memo explaining a large owner distribution, we resolved the audit with no tax change and reduced penalties. The organized approach shortened field time from several days to one day.

Timeline and likely outcomes

• Field-audit length varies: many audits are completed in a single day; complex business audits can take weeks or return visits. After the review, the agent issues a report; negotiation and appeals extend the timeline.
• Outcomes range from no change to proposed tax assessments, penalties, or referrals. Penalties and interest may apply to underpayments—addressing issues quickly lowers extra costs.

Final notes and professional disclaimer

This article explains typical steps to prepare for an IRS field audit but does not replace personalized tax or legal advice. In my practice I encourage early professional engagement for complex matters. Always consult a qualified tax professional before and during an audit.

Authoritative sources referenced: IRS Understanding Audits (https://www.irs.gov/businesses/small-businesses-self-employed/understanding-audits), IRS Taxpayer Bill of Rights (https://www.irs.gov/taxpayer-bill-of-rights), and IRS Publication 552, Recordkeeping (https://www.irs.gov/forms-pubs/about-publication-552).