IRS audits and examinations
An audit is a process. Learn the steps before the IRS takes them.
Correspondence exams, office and field audits, CP2000 matching notices, document requests and audit reconsideration, explained in plain English by tax attorney Darrin T. Mish, a member of The Florida Bar since 1993.
How a typical individual audit moves
Every exam has the same bones. The examiner asks, you answer, the examiner writes a report, and you decide whether to agree. Knowing which step you are on tells you what to do next.
- SelectionReturn scoring, information matching or a related case
- Initial contactA letter by mail, with a response date
- Document requestForm 4564 or the list in the letter
- ReviewBy mail, at an IRS office, or in the field
- ReportForm 4549 with proposed changes
- DecisionAgree, contest, or reopen later
Three kinds of exams, one matching program
By mailCorrespondence auditA campus examiner, a letter and a short list of items. Handled entirely in writing.IRS officeOffice auditAn appointment at a local IRS office with a tax compliance officer.Your locationField auditA revenue agent at your business, your home or your representative’s office.MatchingCP2000 underreporter noticeA computer match against W-2s and 1099s. The IRS does not treat it as an examination.
Audit types and selection
- How the IRS Selects Returns for AuditDIF scores, information matching, related examinations and research samples: the real ways a return gets pulled for an IRS audit, from the IRM itself.
- Correspondence Audits: How an IRS Audit by Mail WorksHow an IRS correspondence audit moves from the initial letter to the 30-day letter and notice of deficiency, with the real response windows from the IRM.
- IRS Office Audits: What Happens at the Local IRS OfficeAn IRS office audit means a tax compliance officer, a document list and an appointment at the IRS office near you. Here is how it runs and how to prepare.
- IRS Field Audits: When a Revenue Agent Comes to YouA field audit brings a revenue agent to your business or home. Learn where it happens, what the agent can tour, and how the mutual commitment date works.
- National Research Program Audits: The Random Exam That Checks EverythingAn NRP audit is a random research exam the IRS uses to build its audit formulas. Every classified issue is examined and every adjustment counts, both ways.
CP2000 underreporter cases
- How to Respond to a CP2000 NoticeA CP2000 proposes tax based on W-2s and 1099s that do not match your return. Here is how to read it, how to respond, and what happens after you do.
- Is a CP2000 an Audit? How Underreporter Notices Differ From ExamsThe IRS treats a CP2000 as information matching, not an examination. Here is what that means for scope, a later audit of the same year, and your options.
- CP2000 Based on a Wrong W-2 or 1099: How to Fight Bad Third-Party DataWhen a CP2000 rests on a 1099 or W-2 that is wrong, duplicated or not yours, here is how to prove it, who to contact, and what IRC 6201(d) adds.
- Ignored a CP2000? What Happens Next and How to Undo ItMissed or ignored a CP2000? Learn how it becomes a CP3219A notice of deficiency and a default assessment, and the routes left to reverse it.
Document requests and records
- Form 4564 Information Document Requests: How to Answer an IDRForm 4564 is how an IRS examiner asks for records. What a proper IDR must say, how to answer one completely, and how to push back on an overbroad request.
- Missed an IDR Deadline? Extensions, Follow-Ups and the Road to a SummonsWhat happens when you miss an IRS document request deadline: extensions, second requests, Letter 2295, the LB&I enforcement steps and when a summons comes.
- What Records the IRS Can Require: IRC 6001 and the AuditIRC 6001 and Treas. Reg. 1.6001-1 set the records you must keep to prove a return. What counts, how long to keep it, and what happens when records fail.
- The Cohan Rule: Estimating Deductions When Records Are MissingLost receipts are not always a lost deduction. How Cohan v. Commissioner permits estimates, where section 274(d) blocks them, and how to rebuild records.
- Section 274(d): The Strict Proof Rules for Travel, Gifts and VehiclesTravel, gifts and vehicles need more than receipts. The four elements section 274(d) requires, what an adequate record is, and the exceptions that still help.
- Bank Deposits Analysis: How Examiners Test Whether You Reported All IncomeExaminers test income with minimum income probes, T-accounts and bank deposit analysis. What section 7602(e) limits, and how to explain nontaxable deposits.
Rights and procedure during the exam
- The Initial Audit Interview: What the Examiner Will Ask and WhyThe initial interview sets the tone of an IRS exam. What the IRM tells examiners to cover, the questions about income and cash, and whether you should attend.
- Your Rights in an IRS Audit Interview: Recording, Representation and StoppingIRC 7521 lets you record an audit interview, stop it to consult a representative, and send that representative instead of going yourself. The rules and limits.
- Third-Party Contacts in an IRS Audit: When the Examiner Calls Your Bank or ClientsBefore an examiner contacts your bank, customers or others, IRC 7602(c) requires advance notice. Letter 3164, the 45-day wait, exceptions and your contact list.
- Changing Where Your IRS Audit Takes PlaceThe IRS picks the audit location, but 26 CFR 301.7605-1 sets limits and lets you ask for a transfer. When transfers are normally granted and how to ask.
- When an IRS Audit Expands to Other Years and IssuesHow examiners decide to add issues, prior or subsequent years and related returns to an audit, what notice you get, and the rules that limit scope.
- Who Has to Prove What in an IRS Audit: Burden of Proof and IRC 7491In an audit you generally must prove your return. IRC 7491 can shift the burden in court if you keep records and cooperate. How the rules work in practice.
Common audit issues
- Earned Income Tax Credit Audits: Proving Your Qualifying Child and IncomeEITC audits are usually by mail and often hold your refund. What the IRS asks for, the documents that prove residency, and the 2 and 10 year bans.
- Charitable Deductions Under Audit: The Paperwork Rules That Decide the CaseCharitable deductions are lost on paperwork more than generosity. The IRC 170 rules on bank records, written acknowledgments, Form 8283 and appraisals.
- Hobby Loss Audits: Proving a Profit Motive Under Section 183When an examiner says your losing business is a hobby, section 183 and its nine regulatory factors decide it. How the profit presumption and Form 5213 work.
- Amended Returns and IRS Audits: Refund Claims Under Review and Amending Mid-ExamAmended returns get screened and can be examined. How refund claim exams work, the claim disallowance letters, and what to do if you need to amend mid-audit.
Closing the audit and after
- Audit Reconsideration: Reopening an IRS Audit You Lost or Never AnsweredAudit reconsideration lets you reopen an unpaid audit assessment with new information. The criteria, Form 12661, where to send it and what happens next.
- When Audit Reconsideration Is Denied or Not Available, and What to Do InsteadPaid balances, closing agreements, Tax Court decisions and wrong routing all block audit reconsideration. Here is each exclusion and the route that still works.
- Form 4549: Reading the IRS Audit Report Before You Sign ItForm 4549 lists the IRS's proposed audit changes. Learn how to read it, what signing waives, partial agreements, and the 30-day letter that follows.
- Stopping Interest During an Audit: Section 6603 DepositsA section 6603 deposit stops interest on a tax you may owe after an audit without conceding the issue. How to designate one, get it back, and earn interest.
- Audited Again? Repetitive Audit Rules and Reopening Closed ExamsAudited on the same issue two years running? The IRM's repetitive audit procedures and Policy Statement 4-3 on reopening closed exams, explained.
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