Overview

An IRS field audit is the most invasive type of tax examination because it occurs at the taxpayer’s place of business, home, or representative’s office. Unlike a correspondence audit (handled by mail), a field audit lets an agent review original records and interview employees or owners on site. The IRS details the field audit process and your rights on its site (see IRS, “Understanding a Field Audit”).

In my practice advising small businesses and individuals for more than 15 years, I’ve seen field audits range from a focused few-hour review of a single issue to multi-day examinations of several years of returns. Proper preparation and knowing what happens on the day of the audit materially shorten the process and reduce unnecessary concessions.

Sources: IRS — Understanding a Field Audit (https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-field-audit) and Publication 556 (Examination of Returns, Appeal Rights, and Claims for Refund) (https://www.irs.gov/pub/irs-pdf/p556.pdf).

Before the audit: immediate steps after you get the notice

  • Read the notice carefully and confirm scope and dates. Notices identify the tax years and line items under review.
  • Note deadlines for document submission or scheduling, and track all correspondence in a single folder.
  • Verify the auditor’s identity and contact information before granting access. IRS agents carry credentials; you can confirm by calling the phone number on the IRS website.
  • Decide on representation. If you plan to have a CPA, enrolled agent, or tax attorney present, notify the auditor and produce a completed Form 2848 (Power of Attorney) if the representative will act on your behalf.

In practice: I always tell clients to treat the audit notice as a project kickoff—assign a single point person, list requested documents, and block uninterrupted time for assembling records.

Documents to gather (high-impact checklist)

Collect originals or certified copies when possible and provide legible reproduction sets for the auditor. Typical documents requested in a field audit include:

  • Tax returns for the years under review and any amended returns.
  • Bank statements and canceled checks (business and personal if relevant).
  • General ledger and trial balance for business entities.
  • Sales journals, invoices, receipts, deposit slips, and POS records.
  • Payroll records (Form W-2s, 1099s issued, timecards) and payroll tax filings.
  • Contracts, leases, purchase agreements, and closing statements.
  • Expense backup (receipts, mileage logs, credit card statements).
  • Loan documents and evidence of debt repayment or forgiveness.
  • Inventory records, shrinkage logs, and physical counts (if applicable).

See the site’s evidence checklist for individuals for a printable starter list: Evidence Checklist for an IRS Field Audit of Individuals.

How the field audit typically unfolds on the day(s) of examination

  1. Arrival and identification. The auditor will arrive at the agreed time, show credentials, and present an appointment letter or notice of examination. If the timing is disruptive, request a short pause to arrange a private workspace.

  2. Opening conference. The auditor explains scope, who will participate, and the expected schedule. This is the time to clarify in-scope years and records.

  3. Records review. The agent examines books and records. They may make copies, take notes, and compare records to the tax return. Expect focused questions about large or unusual items.

  4. Interviews. Auditors often interview owners, managers, or bookkeepers. Keep answers concise and fact-based. If you don’t know an answer, say so and offer to follow up with documentation.

  5. Work papers and requests for additional documents. The auditor may leave with copies or ask for documents to be delivered later. Track any items removed from your premises and get receipts.

  6. Preliminary findings or closing conference. At the end of the on-site visit the agent might provide preliminary observations and an estimated timeline for next steps. Final adjustments will be provided in writing.

In my experience, the opening conference sets the tone. A short, well-documented summary—organized by year and by issue—keeps the audit focused and reduces unnecessary follow-up visits.

Interaction best practices and what not to do

  • Do: Be polite, cooperative, and concise. Offer documents in a logical order and keep a running log of what you produce.
  • Do: Have a tax professional present for technical questions or to handle negotiation on the spot.
  • Don’t: Volunteer unnecessary information. Answer only the question asked and avoid speculating.
  • Don’t: Agree to changes under pressure. If the auditor proposes adjustments, ask for the basis in writing and time to consult your advisor.

Document every conversation and get names and badge numbers of IRS personnel. That record is invaluable if you disagree with findings later.

Common field audit outcomes and next steps

  • No change: The auditor closes the case and no further action is required.
  • Agreed adjustments: You and the auditor agree on changes; you’ll receive documentation (e.g., a proposed change form) and a deadline for payment or amended return.
  • Proposed adjustments (unagreed): The IRS issues a report proposing changes. You have appeal rights and timelines under IRS procedures (see Publication 556).

If you disagree with proposed findings, use the IRS appeals process. The Taxpayer Bill of Rights guarantees the right to challenge the IRS and be informed (see IRS — Taxpayer Rights).

Useful related guidance on appeals and the audit timeline is summarized in the site’s article on how appeals differ from audits: How Appeals Differ from Audits: Strategy and Outcomes.

Typical mistakes that slow audits

  • Poor organization: Incomplete or inconsistent records create delays and additional requests.
  • Over-sharing: Providing irrelevant documents or long narratives increases review time.
  • Missing representations: Not having a trained bookkeeper or tax pro available when complex questions arise.
  • Ignoring follow-up requests: Delayed responses can cause adverse inferences and penalties.

A common theme I’ve seen: clients who maintain a professional audit file—organized by year, with an index and labeled tabs—finish much faster. See our guide on preparing an audit file: Preparing a Professional Audit File: Organize Your Records Like a Pro.

Practical tips to reduce risk and speed resolution

  • Recreate missing documentation where legally permissible (e.g., bank reconciliations, copies of paid invoices, affidavits for lost receipts).
  • Use a daily audit log to track items shown, copies made, and conversations.
  • Consider a pre-audit review with your adviser to identify weak spots and prepare supporting memos.
  • For businesses: prepare a short operations memo explaining revenue recognition, return policies, inventory methods, and unusual year-specific events.

After the audit: response, appeal, and statutes

Expect formal written communication after the fieldwork. If adjustments are proposed, you’ll receive a report and information on appeal rights. Common timelines:

  • The standard statute of limitations for assessment is generally three years from the return due date or filing date; significant omissions (usually >25% of gross income) can extend assessment to six years; fraud may have no time limit (IRS rules and Publication 556).

Keep copies of everything produced to the auditor—your defense in any subsequent appeals or collection actions.

Where to find authoritative help

Final notes and professional disclaimer

Field audits are stressful but manageable when treated like a structured project: read the notice, organize records, limit volunteers for interviews, and have a tax professional guide the process. In my practice I’ve repeatedly seen thorough documentation and calm, concise responses resolve most issues without material adjustments.

This content is educational and not individualized tax advice. Consult a qualified tax professional to review your specific facts and represent you during an IRS examination.