Got a Letter From the IRS? What to Do
From Tax Guide.
Tax Guide · Arab, Alabama
What to Expect in an IRS Audit: Types, Process and Your Rights
Being audited is stressful but manageable. See the types of IRS audits, what the process looks like, what to bring and how to respond.
The short answer
What happens if I am audited by the IRS?
An IRS audit is a review of a return to check that income, deductions and credits are reported correctly, and it usually begins with a letter in the mail.
An audit is not an accusation. It is a request to back up what was reported. Many audits are limited to one or two items and are resolved by sending documents.
The IRS contacts taxpayers about an audit by mail first. If someone calls or emails claiming an audit and demands immediate payment, treat it as a possible scam. Do not ignore a genuine letter, keep a copy, and call our office if you are not sure what to do.
Kinds of audits
What are the different types of IRS audits?
IRS audits generally fall into three kinds, which differ in how much is examined and where it takes place.
The letter you receive will tell you which kind you have. The types are described below in general terms.
| Type | How it works | Typical scope |
|---|---|---|
| Correspondence audit | Handled by mail; you send documents | A few items, often simple |
| Office audit | You meet with an examiner at an IRS office | More items or more detail |
| Field audit | An examiner visits your home or place of business | Often broader, often business related |
A notice that asks you to confirm a mismatch, like a CP2000, is a matching review and is described in our guide to IRS notices.
Getting ready
How do I prepare for an IRS audit?
You prepare by reading the letter closely, gathering only what it asks for, and organizing it clearly.
The letter lists the items under review and the tax year. Stick to those. Do not volunteer information beyond what is requested, and do not guess at an answer if you do not know it.
Good records make the biggest difference. Receipts, statements, mileage logs and invoices support what was on the return, which is why our guides on keeping tax records and tracking receipts matter long before any letter arrives.
- Note the response deadline and mark it on a calendar.
- Make copies of everything you send; keep the originals.
- Organize documents by the item they support.
- Add a short note on the business purpose where it is not obvious.
- Use a trackable method when you mail anything.
- Ask for more time in writing if you need it.
Your rights
What are my rights during an IRS audit?
Taxpayers have rights during an audit, including the right to be treated professionally, to be represented, to disagree and to appeal.
The IRS publishes a Taxpayer Bill of Rights in Publication 1. Among other things, it gives you the right to know what the IRS is asking and why, to challenge its position and be heard, to appeal a decision, and to have a representative act for you.
You do not have to face an examiner alone. A representative with a signed power of attorney can speak with the IRS for you; see power of attorney for tax matters. If you disagree with the results, you can explain your position and use the appeal process described in the report.
After the review
How does an IRS audit end?
An audit ends in one of three ways: no change, a change you agree with, or a change you disagree with.
If the examiner accepts your return, you receive a letter saying so. If they propose changes and you agree, you sign, and any tax owed becomes a balance the IRS will bill. If you disagree, you can request an appeal.
A balance from an audit can often be handled with an arrangement; see IRS payment plans. Penalties may also be reviewed under certain conditions; see penalty relief and abatement. Results vary, and no one can promise an outcome.
Because Alabama lets taxpayers deduct federal income tax paid, a federal audit change can lead to a change on the Alabama return too, so check on the state side.
Common triggers
What kinds of things lead to an IRS audit?
An audit can start from a mismatch, a review of a certain type of return, or an item that looks unusual compared with others.
Many reviews come from matching: the IRS compares your return with forms filed by employers, banks and others, and a difference draws attention. Others come from claims that need proof, such as certain credits or large deductions for business use.
A review does not always mean something is wrong. Honest mistakes, missing paperwork and unclear records are common reasons. Keeping good records is the strongest preparation, as described in how long to keep tax records.
- Income on forms that does not appear on the return.
- Claims that need supporting records.
- Business returns with large or unusual deductions.
- Returns tied to another return already under review.
How we can help
Facing an audit? We can stand with you.
Melton Tax Services can help through our tax representation service.
We can review the notice, explain the options and respond to the agency on your behalf. Do not ignore the letter: keep a copy, and call us as soon as it arrives.
We serve Arab and the surrounding area. Call 256-586-4635 or use the contact page. Please bring the notice and records to the office rather than sending them through the website.
Answers
Questions about irs audit
Why was I chosen for an audit?
Returns can be selected for several reasons, including matching problems and random or related-party reviews. The letter usually names the items being checked, which is the clearest clue.
Do I have to go to an IRS office?
Not always. Many audits are handled entirely by mail. If a meeting is needed, a representative with a power of attorney can often attend for you.
How far back can the IRS audit?
Generally about three years from filing, though longer periods can apply in some cases. Keeping records for that period is wise.
Can I record or bring someone to the meeting?
You may bring a representative. Rules about recording differ, so ask about them before the meeting.
Should I pay right away if the IRS proposes a change?
Not until you understand it. Read the report, compare it with your records, and decide whether to agree. You may also be able to arrange payment over time.
Will an audit lead to more audits?
Not automatically. One audit does not mean you will be audited again, but the examiner can look at related years in some situations.
Does a large refund cause an audit?
A refund alone does not mean you will be audited. The IRS looks at many factors, and we cannot predict which returns will be selected.
What if I cannot find the records the auditor asks for?
Tell the examiner and ask for time. Bank statements, vendor copies and other substitutes may help. A representative can guide you through what is acceptable.
Read next
Related reading
Power of Attorney for Tax Matters: Form 2848
From Tax Guide.
How Long to Keep Tax Records
From Tax Guide.
Tax Representation
A service Melton Tax Services provides.
Melton Tax Services
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