What Happens If You Get Audited by the IRS?

An audit by the Internal Revenue Service (IRS) involves a review of an individual’s or organization’s financial information and tax returns to ensure accuracy and compliance with tax laws. The purpose of these examinations is to verify reported income, deductions, and credits. While the idea of an audit might cause concern, it is a routine process for the IRS to uphold the integrity of the tax system.

An audit does not automatically imply wrongdoing. The IRS selects returns for audit using various methods, including random selection and computer screening that compares returns against statistical norms. For most taxpayers, the likelihood of being audited is relatively low; for instance, only about 0.2% of all individual income tax returns filed for the 2020 tax year faced an audit, meaning approximately 1 in 500 returns are examined annually.

Receiving an Audit Notification

An audit notification from the IRS, state tax agencies, or local tax authorities arrives primarily via mail. These agencies will never initiate an audit contact solely by phone, email, or social media.

The audit letter provides important details, including the specific tax year or years under review and the particular items or issues being examined. It also specifies the type of audit: a correspondence audit (handled by mail), an office audit (requiring a visit to an IRS office), or a field audit (conducted at the taxpayer’s home or business). The notification will also outline initial requested actions, such as submitting documents or scheduling an appointment.

Gathering Information and Documents

Upon receiving an audit notification, gather the requested information and documents. The audit letter specifies the exact records needed to support the figures reported on your tax return. Common documents requested include income statements (such as W-2s and 1099s), expense receipts, bank statements, canceled checks, loan documents, mileage logs, and records of charitable donations or medical bills.

Organize documents by category or date for a smoother review. Have original documents or clear copies readily available. When submitting documents, always retain copies of everything sent to the auditing agency and avoid sending originals unless explicitly requested. Reviewing your tax return for the audited year(s) alongside the gathered documents helps ensure you understand the reported figures and how they relate to your records.

Engaging with the Auditor

Engagement with an auditor varies by audit type. For a correspondence audit, interaction involves sending requested documents by mail and responding to written follow-up questions. During an office audit, you meet with the auditor at an IRS office, presenting prepared documents and answering specific questions. A field audit involves the auditor visiting your home or business to review records on-site, potentially including physical inspection of assets or operations.

The auditor’s role is to verify the accuracy of information on your tax return and clarify discrepancies. Answer questions truthfully and directly, providing only the information specifically requested. Taxpayers have rights during an audit, including the right to representation by a qualified tax professional (such as an Enrolled Agent, Certified Public Accountant, or tax attorney), the right to record the interview, and the right to appeal proposed changes. A tax professional can represent you, communicate with the auditor, and help protect your rights.

Understanding Audit Results

The audit process concludes with a determination of whether your tax return requires adjustments. Three possible outcomes exist: a “no change” result (the return is accepted as filed); an “agreed” outcome (the taxpayer accepts proposed changes, leading to additional tax or a refund); or an “unagreed” outcome (the taxpayer disputes the auditor’s findings).

If changes are proposed, the taxpayer will receive a notification, often referred to as a “30-day letter,” outlining the proposed adjustments and the reasons for them. If you disagree with the findings, you can request a conference with an IRS manager to discuss the issues, or you can file an appeal with the IRS Office of Appeals. The Office of Appeals provides an independent review, offering an opportunity to resolve the dispute without litigation. If an agreement is reached, instructions for payment or refund processing will be provided. If the appeals process is exhausted without resolution, the IRS may issue a “90-day letter,” also known as a Statutory Notice of Deficiency, which grants the taxpayer 90 days to petition the U.S. Tax Court if they wish to further challenge the proposed tax deficiency.