Tax Resolution
You are entitled to
not be in the room.
An examination is a bounded procedure with defined scope, defined evidence rules and a defined appeal route. The most common way it goes badly is a taxpayer answering a question that was never asked.
The short answer
What should I do if the IRS is auditing me?
Do not respond substantively, and do not attend, before you have representation. A Form 2848 Power of Attorney lets an Enrolled Agent, CPA or attorney deal with the examiner entirely in your place. In most correspondence and office examinations you will never speak to the IRS at all.
The examination has a defined scope, and keeping it there is the main protection you have. The opening letter names specific items on specific years. An examiner may expand that scope, and the most common reason they do is that a taxpayer, trying to be helpful, volunteered something outside it. Answer what is asked, completely and promptly, and nothing else.
The three kinds of examination
| Correspondence | Office | Field | |
|---|---|---|---|
| Conducted by | Tax examiner, by mail | Tax compliance officer, at an IRS office | Revenue agent, at your premises or your representative's |
| Typical scope | One or two specific items | Several items on one return | Entire return or returns, often a business |
| Share of examinations | The large majority | Smaller | Smallest, and the most serious |
| Usual trigger | Document mismatch or a specific credit | Itemised deductions, Schedule C items | Business complexity, entity returns, high income |
| Handled by us as | Written response with substantiation | We attend; you do not | We host and manage all contact |
A field audit is the one to take most seriously, not because the examiner is adversarial but because the scope is broadest and a revenue agent has authority to expand it. Holding a field examination at a representative's office rather than at your business premises is standard practice and is worth doing.
What an examiner is entitled to
An Information Document Request is exactly that: a request. It is not a subpoena, and its scope is bounded by the years and issues under examination. You are entitled to reasonable time, to understand why a document is relevant, and to have your representative present at any interview. Under the Taxpayer Bill of Rights you may also record an interview with advance notice.
You are not entitled to withhold records that substantiate items you claimed. Substantiation is your burden on deductions, and the correct response to a legitimate request is a complete and organised answer, delivered promptly. Slow, partial responses build a poor record and invite expansion of scope.
Where examinations are actually won
- Organisation. A tidy, indexed, tied-out substantiation package changes the examiner's working assumption about the whole return. This is not cosmetic; it materially affects how far they look.
- Scope discipline. Every answer confined to the question asked. No unrequested years, no explanatory narrative about unrelated matters.
- The substantiation rules. Most expenses can be reconstructed from reasonable evidence. Travel, meals, gifts and listed property cannot; those are held to a strict standard requiring contemporaneous records of amount, time, place and business purpose. Knowing which category an item falls in determines whether it is worth contesting.
- Appeals. The Independent Office of Appeals weighs the hazards of litigation, which the examination function does not. A position an examiner disallowed outright is frequently settled at Appeals on a percentage basis.
The route if you disagree
- Examination report, Form 4549. The examiner's proposed adjustments. Signing it closes the matter and waives your route to Appeals and Tax Court.
- Thirty-day letter. Gives thirty days to file a written protest and request an Appeals conference. This is the route that should be used.
- Appeals conference. Independent of the examining office, considering litigation risk. Most disputes end here.
- Notice of Deficiency, Letter 3219. The statutory notice. Ninety days to petition the Tax Court, with no extensions available under any circumstances. After it, the tax is assessed. The notice sequence is set out here.
After the examination
An adjustment produces an assessment, and an assessment produces a balance. If that balance cannot be paid, the collection alternatives apply as they would to any other liability. Accuracy-related penalties assessed alongside an adjustment are frequently contestable on reasonable cause grounds, particularly where the position was taken on professional advice.
Audit FAQ
Questions about IRS audits.
Do I have to attend the audit myself?
No, and generally you should not. With a Form 2848 Power of Attorney, your representative attends in your place and you need never meet the examiner. This is not evasiveness; it is the reason the representation right exists. Taxpayers who attend alone tend to volunteer information outside the scope of the examination, which is how a one-issue audit becomes a three-year audit.
How far back can the IRS audit me?
Three years from the filing date as a general rule. That extends to six years where income is understated by more than twenty-five per cent, and there is no limit at all where a return was never filed or where fraud is alleged. Most examinations concern one or two recent years, and keeping it that way is part of the work.
What triggers an audit?
Most selections come from the Discriminant Function System, a scoring model comparing your return against statistical norms for similar returns. Other common triggers are third-party document mismatches, large or unusual deductions relative to income, consistent Schedule C losses, cash-intensive businesses, and being a partner or shareholder in an entity already under examination. A minority are simply random compliance studies.
What if I disagree with the auditor?
You have a full appeal route. If you disagree with the examination report, you can request a conference with the IRS Independent Office of Appeals, which is separate from the examination function and evaluates the hazards of litigation rather than simply the examiner’s position. If that fails, a Notice of Deficiency gives you ninety days to petition the Tax Court. A great many examinations that look settled are improved substantially at Appeals.
Can an audit lead to criminal charges?
It is possible but uncommon. Civil examiners who suspect fraud refer matters to Criminal Investigation, at which point the examination typically pauses without explanation. That silence is a signal, and it is the point at which a tax attorney rather than an Enrolled Agent becomes the right representative, because attorney-client privilege is broader than the practitioner privilege. We will tell you plainly if we think a matter has crossed that line.
What records do I need?
Whatever substantiates the items under examination, and nothing else. Provide what is requested, organised and complete, and do not volunteer additional years or unrelated documents. Where records are missing, reconstruction using recognised methods is accepted for most expense categories, though certain items, notably travel, meals, gifts and listed property, are held to a stricter substantiation standard.
Keep Reading
What an audit can turn into.
Do Not Go Alone
Let the examiner
talk to us instead.
A Power of Attorney takes you out of the conversation entirely. Most clients in a correspondence or office examination never speak to the IRS at all.