Receiving an IRS audit notice can be alarming, but understanding the process takes much of the anxiety out of it. Most audits are straightforward, and with proper documentation and professional representation, they typically resolve without major issues.
Types of IRS Audits
- Correspondence audit: The most common type. The IRS sends a letter asking for documentation to support specific items on your return. You respond by mail.
- Office audit: You're asked to bring documentation to a local IRS office for an in-person review of specific items.
- Field audit: An IRS agent visits your place of business. This is the most comprehensive type and usually involves higher-income returns or complex business activities.
Common Audit Triggers
- High deductions relative to income (especially home office, meals, and vehicle expenses)
- Consistent losses on Schedule C — the IRS may question whether your activity is a business or hobby
- Large charitable contributions relative to income
- Unreported income flagged by W-2s, 1099s, or third-party reporting
- Round numbers on expense deductions (suggests estimation rather than actual tracking)
How to Prepare
- Don't ignore the notice — respond by the deadline
- Gather all documentation for the items being examined
- Don't volunteer information beyond what's requested
- Hire a CPA or enrolled agent to represent you — they can handle all communication with the IRS on your behalf
Prevention Is Better
The best audit strategy is prevention: keep organized records, file accurate returns, document your deductions, and work with a CPA who reviews your return for red flags before filing.