Surviving an IRS Audit
Know what triggers an audit, how the types differ, your rights, and how to respond calmly and on time.
TL;DR
- Expect most audits by mail as a narrow
correspondenceAudit. - Reduce risk by matching every
1099and keeping clean records. - Answer any notice by its
deadline, or the proposed amount stands.
Types of Audits
CorrespondenceBy mail, over one or two items; the most common kind.
About 75% of auditsOfficeYou bring documents to a local IRS office.
Several line itemsFieldAn agent visits your home or business.
Comprehensive, often businessesBy Mail OnlyReal audits begin with a letter, never a call.
Phone or email = scamCommon Triggers
Income MismatchYour return must match the 1099s and W-2s on file.
Report every 1099 and W-2Outsized DeductionsVery large write-offs for your income draw a look.
Big charity vs incomeSchedule C LossesRepeated business losses can look like a hobby.
Years of losses = flagHome OfficeThe space must be used only for business.
Exclusive, regular useYour Rights
RepresentationA pro can handle all IRS contact for you.
CPA, EA, or attorneyKnow WhyThe IRS must say what it is examining and why.
Ask what is under reviewAppealDisagree and take it to an independent office.
Office of AppealsFinalityA closed year generally cannot be reopened.
No second audit of a closed yearRespond and Prepare
Meet the DeadlineReply in the 30 to 60 days the notice gives.
Miss it = automatic assessmentGather ProofPull the receipts and statements for the items asked.
Match documents to the noticeKeep Records 7 YearsHold returns and backup well past the audit window.
3-year rule, 7 to be safeLog as You GoContemporaneous logs beat anything rebuilt later.
Date, purpose, milesTips
- Answer only what the notice asks and attach just those documents, since volunteering extra information can open new
lines of inquiry. - Keep a
contemporaneousLogfor mileage and business use, since records kept as you go carry far more weight than ones rebuilt later.
Warnings
- The IRS starts audits only by
mail, so any phone call or email claiming to be an audit is a scam. - Ignoring a notice past its deadline usually leads to an automatic
assessmentof the full amount the IRS proposed.
In Practice
See why a mismatch notice is a proposal you can reduce, not a final bill.
You get a CP2000 saying you left a $4,000 1099 off your return and proposing $880 more tax at your 22% rate.
- The notice is an automated proposal from data matching, not a final bill.
- You find $1,500 of deductible expenses tied to that income.
- Corrected extra income: $4,000 - $1,500 = $2,500.
- Reply by the deadline with proof: $2,500 x 22% = $550.
Your response cuts the proposed $880 down to about $550.
A CP2000 is a proposal; answer it on time with records, and silence lets the full amount stand.
FAQ
The IRS scores returns against statistical norms for your income level and flags the outliers. Common triggers are large charitable deductions relative to income, repeated Schedule C losses, a home office claim, and income that does not match a 1099 or W-2 the IRS already has. Plain math errors usually bring an automatic notice, not a full audit.
Generally three years from when you filed. That stretches to six years if you understated income by 25% or more, and there is no time limit at all in cases of fraud. Keeping your records for at least seven years covers essentially every situation.
No. The Taxpayer Bill of Rights guarantees your right to representation, so a CPA, enrolled agent, or attorney can handle all contact for you. You also have the right to know why you are being examined and exactly which documents the IRS wants. For anything beyond a simple mail audit, representation is wise.
A correspondence audit happens entirely by mail over one or two specific items, and it is by far the most common. A field audit is comprehensive, with an agent visiting your home or business, and is mostly reserved for businesses. An office audit sits in between, asking you to bring several items to an IRS office.