IRS Audit: What to Expect and How to Prepare
Getting audited sounds terrifying. Here is what actually happens, what the IRS is looking for, and how to get through it.
What Triggers an IRS Audit
The IRS audits less than 1 percent of individual returns, so if you received an audit notice, it is likely due to specific red flags. Common triggers include income discrepancies where your reported income does not match W-2s or 1099s the IRS received, unusually high deductions relative to income, large charitable donations without proper documentation, home office deductions, significant business losses reported year after year, unreported income from side jobs or cash transactions, and math errors or inconsistencies on the return.
Three Types of Audits
Correspondence audit: the most common type. The IRS sends a letter asking for documentation on specific items. You respond by mail with the requested documents. No in-person meeting required. Office audit: you are asked to bring documents to a local IRS office for an in-person meeting. This is more thorough than a correspondence audit. Field audit: an IRS agent visits your home or business. This is the most intensive type and is typically reserved for complex business returns or suspected fraud. Most individual audits are correspondence audits.
How to Prepare
Gather all documents related to the items being questioned: W-2s, 1099s, receipts, bank statements, cancelled checks, and any records supporting your deductions. Organize them by category and in chronological order. Review the return being audited and your supporting documentation before responding. Only provide what is specifically requested — do not volunteer additional information or documentation. If you are unsure about any item, consult a tax professional before responding.
Your Rights During an Audit
You have the right to representation by a CPA, enrolled agent, or tax attorney. You have the right to know why the IRS is asking for information and how they will use it. You have the right to appeal any IRS decision you disagree with. You have the right to request a different auditor if you feel you are being treated unfairly. You have the right to record the audit meeting. If you cannot afford representation, Low Income Taxpayer Clinics provide free or low-cost help.
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