When Does the IRS Send Out Audit Letters?

The Internal Revenue Service (IRS) conducts audits to ensure the accuracy of reported tax information and compliance with tax laws. An audit reviews financial records to confirm income, expenses, and credits are correctly stated on a tax return. Receiving an audit letter does not necessarily mean an error was made; it indicates the IRS wants to examine the return more closely.

How the IRS Communicates Audits

The IRS primarily initiates audits by mail, sending official letters to taxpayers. This initial contact will not occur via phone calls, emails, or social media.

A legitimate IRS audit letter will feature official letterhead, often marked with the IRS logo and “Official Business,” and will typically be sent via certified mail to ensure proof of delivery. These letters identify the taxpayer’s name, taxpayer identification number (such as a Social Security Number), the tax year under review, and IRS contact information. They also state the audit reason, outline needed documentation, and include a response deadline, which is typically 30 days.

Common Triggers for Audit Letters

The IRS uses various methods to select tax returns for audit, including random selection and automated computer screening. A frequent trigger is a discrepancy between income reported on a tax return and information the IRS receives from third parties, such as W-2s or 1099s. When these amounts do not match, the system may flag the return.

Unusually large deductions or credits can also draw attention, including substantial charitable contributions without adequate documentation or excessive business deductions. Significant changes in reported income from one tax year to the next, consistent business losses, simple mathematical errors, or incomplete information on a tax form can also lead to an audit letter.

Understanding Different Audit Communications

When the IRS conducts an audit, the type of communication indicates the scope and format. There are three primary types of IRS audits.

Correspondence Audits

The most common is a correspondence audit, conducted entirely by mail. These audits typically address minor issues, such as missing documentation or simple calculation errors, and the letter will request specific information or clarification.

Office Audits

An office audit requires the taxpayer to visit an IRS office for an interview. These audits are generally more comprehensive than correspondence audits and often involve issues related to itemized deductions or business income and expenses. The letter will specify the records to bring and the items under review.

Field Audits

Field audits are the most extensive type, where an IRS agent visits the taxpayer’s home, business, or accountant’s office to review financial records. These are usually reserved for more complex tax returns or when significant discrepancies are suspected.

Responding to an Audit Letter

Upon receiving an IRS audit letter, the first step is to open and carefully read it. Understand the requested information, the tax year under review, and the specified deadline for response. Verify the letter’s legitimacy by checking for official IRS markings and ensuring it comes through official mail.

The next step involves gathering all requested documentation, such as receipts, bank statements, or other relevant records. Do not send original documents; always provide copies. If you need more time, contact the IRS to request an extension. Professional advice from a tax professional is often beneficial, as they can help navigate the process and ensure a proper response.