Receiving an audit notice from the IRS can be stressful — even if you’ve done everything right. But an IRS audit is simply a review to verify the accuracy of your tax return, not an automatic accusation of wrongdoing. Understanding the IRS audit process step by step helps you stay calm, organized, and compliant throughout the examination. This guide will take you through the IRS audit process step by step and ensure you know what to expect during each phase of the IRS audit process.
The IRS outlines its procedures in Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund. Here’s what to expect.
IRS Audit Process Step by Step Overview
Step 1: The IRS Notifies You
You’ll receive a letter (never a phone call or email) notifying you that your return has been selected for examination.
Common notice types include:
- Letter 566 – Start of an audit (correspondence)
- Letter 2205-A/B – Notification of an in-person or field audit
- CP2000 – Proposed adjustment due to income discrepancy
💡 Tip: Always verify that the notice is legitimate. You can check the letter type on the IRS Notice Directory.
Step 2: The IRS Identifies the Issues Under Review
Your audit letter will list specific items on your tax return being reviewed — such as:
- Unreported income
- Deductions or credits claimed
- Business expenses
- Property transactions
The IRS will request supporting documents — receipts, bank statements, invoices, or logs — to verify the accuracy of those items.
Step 3: Gather and Organize Your Records
Before responding, collect all relevant documentation. Create a clear, organized file for each year or issue under review. The IRS may accept electronic copies (PDF, scanned images, spreadsheets), but always retain the originals.
💡 Tip: A tax attorney or enrolled agent can help you prepare and review your records for completeness before submission.
Step 4: The IRS Conducts the Examination
There are three main types of IRS audits:
A. Correspondence Audit (Mail Audit)
- Conducted entirely by mail.
- Typically limited to specific items like charitable deductions or income discrepancies.
B. Office Audit
- Conducted at an IRS office.
- You’ll meet with an auditor to review documentation.
- You can bring your representative (tax attorney or CPA).
C. Field Audit
- Conducted at your home, business, or accountant’s office.
- The most in-depth type of audit, often for complex or high-value returns.
The IRS explains each type in its Audit Process Guide.
Step 5: The Auditor Reviews and Requests Clarifications
The auditor may ask for additional documentation or clarification. If discrepancies are found, the IRS will propose adjustments and explain the reasoning.
At this stage, communication is critical — never ignore requests or deadlines. Your representative can communicate directly with the IRS to clarify or negotiate issues.
Step 6: The IRS Issues Findings (Form 4549)
When the audit is complete, you’ll receive an Exam Report (Form 4549) outlining:
- Proposed changes to your return;
- Additional taxes, penalties, or interest (if applicable); and
- A summary of findings.
You can either:
- Agree and sign the report; or
- Disagree and request an appeal.
Step 7: Appeal or Resolution
If you disagree with the audit results, you have the right to appeal within the IRS or, if needed, take your case to Tax Court. Appeals can often resolve disputes without litigation.
Step 8: Case Closure and Next Steps
Once the audit is finalized (and any balance is paid or appealed), your case is closed. If you owe taxes, you may qualify for payment arrangements such as:
- Installment Agreement
- Offer in Compromise
- Penalty Abatement
See IRS Payment Plan Options for more information.
How Long Does the IRS Audit Process Take?
Audit timelines vary depending on the complexity of the return. You can request an extension if you need additional time to provide documentation.
When to Get Professional Help?
You should contact a tax attorney if:
- You’re facing a large potential tax bill
- The audit involves multiple years or business records
- You suspect potential criminal exposure (fraud or evasion)
- You’ve already received a Notice of Deficiency (CP3219A)
Representation ensures you’re protected and your case is handled strategically.
If this article raised questions about your situation, we can help.
An IRS audit doesn’t have to be intimidating when you understand the process and your rights.
By staying organized, responsive, and informed, you can resolve your audit efficiently and minimize financial exposure.
If you’ve received an audit notice, contact Pelham PLLC for a confidential consultation. Our tax attorneys help individuals and business owners navigate the IRS audit process — from start to finish.
For official IRS resources, visit the IRS Audits Overview.
FAQs
How long does an IRS audit take?
Most audits take between 3 and 12 months, depending on complexity and whether it’s by mail, in-office, or field-based.
Can I represent myself in an IRS audit?
Yes, you can — but it’s often advisable to have a tax attorney or CPA represent you, especially if the audit involves large amounts or potential penalties.
What happens if I ignore an IRS audit letter?
Ignoring the letter can lead to automatic assessments, penalties, or enforced collection actions like liens or levies.
What should I do if I disagree with the audit findings?
You can appeal within the IRS or take your case to Tax Court. A tax attorney can guide you through the appeals process and negotiate on your behalf.
