Few pieces of mail cause more anxiety than a letter from the Internal Revenue Service. Yet an IRS audit is often less dramatic than people fear. Most audits are handled entirely by mail and focus on a few specific items. Understanding how audits work, how long the IRS has to start one, and how to respond can help you protect your rights and resolve the matter efficiently. This guide is general information, not tax or legal advice.
What an IRS audit is
An audit, which the IRS calls an examination, is a review of your tax return and records to verify that income, deductions, and credits were reported correctly. Being selected does not necessarily mean the IRS suspects wrongdoing. Returns can be selected by computer scoring, by matching against information returns such as W-2s and 1099s, or because they are related to another taxpayer’s audit, such as a business partner.
Notices that are not audits
Many IRS letters are not audits. A CP2000 notice, for example, comes from the Automated Underreporter program and proposes changes because income reported to the IRS by third parties does not match your return. A math error notice corrects arithmetic or transcription errors. These still require prompt attention, but they are generally simpler to resolve.
How the IRS contacts you
The IRS initiates audits by mail. It does not start an audit with a phone call, email, text message, or social media message. Scammers frequently impersonate the IRS, so be skeptical of unsolicited contact. You can verify a letter by checking the notice number on IRS.gov or calling the IRS directly using numbers listed there, not numbers in a suspicious message. An IRS revenue agent may later call or visit to schedule or conduct an audit, but generally only after you have received written notice.
Types of audits
Correspondence audit
The most common type. The IRS mails a letter asking you to send documentation for specific items, such as charitable contributions, education credits, or the Earned Income Tax Credit. You respond by mail, fax, or through the IRS’s document upload tool if offered.
Office audit
You are asked to meet with an IRS tax compliance officer at a local IRS office and bring records for the items listed in the letter.
Field audit
A revenue agent examines records at your home, place of business, or your representative’s office. Field audits are more comprehensive and are more common for businesses and complex returns.
How long the IRS has to audit
The general statute of limitations for assessing additional tax is three years from the date you filed the return, or from the due date if you filed early. Exceptions include:
- Six years if you omitted more than 25% of the gross income shown on the return.
- No limit if you never filed a return or filed a fraudulent return.
- Extensions if you agree to extend the period, often by signing Form 872 during an audit.
The IRS generally aims to include returns filed within the last three years in an audit and typically does not go back more than six years.
Common red flags
The IRS does not publish its selection formulas, but certain situations are commonly associated with greater scrutiny:
- Unreported income that appears on information returns
- Large deductions relative to income, such as charitable gifts out of line with earnings
- Schedule C businesses with repeated losses or high cash receipts
- Home office, vehicle, and meal deductions without clear documentation
- Earned Income Tax Credit claims, which the IRS reviews closely for eligibility
- Rental losses claimed by taxpayers with high incomes
- Cryptocurrency transactions not properly reported
- Large round numbers that suggest estimates
Having one of these does not mean you will be audited; it means accurate records matter.
How to respond to an audit letter
- Read the letter carefully. Identify the tax year, the items under review, and the deadline.
- Do not ignore it. Missing deadlines can lead the IRS to assess the proposed tax.
- Gather documentation for only the requested items: receipts, bank statements, invoices, mileage logs, and canceled checks.
- Organize your response. Include a cover letter referencing the notice, a list of enclosed documents, and copies, not originals.
- Request more time if needed. The IRS often grants reasonable extensions if you ask before the deadline.
- Consider professional help from a CPA, enrolled agent, or tax attorney, especially for office or field audits.
Representation
You can authorize a representative with Form 2848, Power of Attorney and Declaration of Representative. Your representative can communicate with the IRS and attend meetings on your behalf, often without you present.
Possible outcomes
- No change. The IRS accepts your return as filed.
- Agreed. You agree with proposed changes, sign the report, and pay or arrange payment.
- Disagreed. You do not agree and can request a conference with a manager, go to the IRS Independent Office of Appeals, or ultimately petition the U.S. Tax Court.
If additional tax is owed, interest accrues from the original due date, and penalties such as the 20% accuracy-related penalty may apply. Penalties can sometimes be reduced or removed for reasonable cause.
Your rights as a taxpayer
The Taxpayer Bill of Rights includes the right to be informed, to quality service, to pay no more than the correct amount of tax, to challenge the IRS’s position and be heard, to appeal in an independent forum, to finality, to privacy, to confidentiality, to retain representation, and to a fair and just tax system.
If you face financial hardship or problems resolving an issue through normal channels, the Taxpayer Advocate Service, an independent organization within the IRS, may be able to help at no cost. Low Income Taxpayer Clinics also offer free or low-cost representation for eligible taxpayers.
Appeals and Tax Court
If you disagree with the audit results, you may receive a 30-day letter proposing changes and explaining appeal rights. You can file a written protest to request an Appeals conference. If you do not resolve the case, the IRS issues a Statutory Notice of Deficiency, also called a 90-day letter. You generally have 90 days from the date of that notice, 150 days if addressed outside the United States, to petition the U.S. Tax Court without paying the tax first. Missing this deadline can forfeit your right to go to Tax Court before paying.
Reducing audit risk
- Report all income, including from side jobs, gig work, and investments.
- Keep receipts and logs for deductions, especially for business and charitable expenses.
- Double-check Social Security numbers and math.
- Use accurate figures instead of estimates.
- File electronically to reduce errors.
- Keep records for at least three years, longer for property records and in situations involving the six-year rule.
Paying what you owe after an audit
If an audit results in additional tax you cannot pay in full, contact the IRS promptly. Options include a short-term payment plan of up to 180 days, a long-term installment agreement, or in hardship cases an offer in compromise or currently not collectible status. Interest and the failure-to-pay penalty continue to accrue until the balance is paid, so paying as much as possible early reduces cost.
Related reading: Home Office Deduction: Who Qualifies and How to Calculate It.
Frequently Asked Questions
How does the IRS notify you of an audit?
By mail. The IRS does not initiate audits through phone calls, emails, or text messages.
How far back can the IRS audit?
Generally three years from filing, six years if you omitted more than 25% of gross income, and indefinitely for fraud or unfiled returns.
What is a correspondence audit?
An audit conducted entirely by mail, in which you send documentation for specific items on your return.
Do I need a professional for an IRS audit?
Not always, but a CPA, enrolled agent, or tax attorney can be valuable for complex or in-person audits.
Can I appeal an IRS audit?
Yes. You can request an Appeals conference and, after a notice of deficiency, petition the U.S. Tax Court within 90 days.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
