Changing Where Your IRS Audit Takes Place

IRC 7605(a) says the time and place of an examination shall be fixed by the IRS and be "reasonable under the circumstances." The regulation that implements it, 26 CFR 301.7605-1, says IRS employees should balance the convenience of the taxpayer with the requirements of sound and efficient tax administration. That balance is your opening.

The default locations

The IRS generally makes an initial determination of where the exam will be held based on the address on the return for the year under exam (301.7605-1(d)(1)). From there:

• Office exams of individuals and sole proprietors are generally based on your residence and held at the closest IRS office in the district that includes it. The regulation says it generally is not reasonable to require you to go to an office other than the closest one, unless the closest office lacks an examination group or the right personnel (301.7605-1(d)(2)).
• Field exams generally take place where your original books, records and source documents are kept, which for a business is usually the principal place of business (301.7605-1(d)(3)(i)).
• Correspondence exams happen by mail with a campus. Moving one to a local office is handled as a transfer request. See correspondence audits.

When the IRS will normally agree to transfer

The regulation lists circumstances in which a transfer request "will generally be granted" (301.7605-1(e)(2)):

Exam type	Circumstance	Normal result
Office	Your residence is closer to a different IRS office in the same district	Transfer to the closer office
Office	Your residence is now in a different district	Transfer to the closest office in the other district
Field	You do not live at the residence where the exam was scheduled	Transfer to your current residence
Field	Your books and records are kept somewhere else	Transfer to where the records are kept

For entities, the office exam rules key off where the books and records are maintained rather than a residence.

Other grounds the IRS must consider

Outside those four situations, the IRS considers written requests case by case, weighing (301.7605-1(e)(1)):

• Your current residence.
• Your current principal place of business.
• Where your books, records and source documents are kept.
• Where the IRS can do the exam most efficiently.
• IRS resources at the location you want.
• Other factors showing a particular location would pose undue inconvenience to you.

Three special rules worth knowing

Small businesses that cannot host an audit

If a field exam is scheduled at your place of business and you state in writing that holding it there would essentially require the business to close or would unduly disrupt operations, the IRS, upon verification, will move it to an IRS office in the district where your records are kept (301.7605-1(d)(3)(ii)). The IRM adds that it is generally not reasonable to audit at the business if the business is so small the exam would force it to close, but that in most cases the mere presence of an examiner would not disrupt operations enough to justify a move (IRM 4.10.2.9.2.1). Make your case with specifics: square footage, staff, customer flow.

Even after a move, the IRS may still visit to establish facts that can only be established by a direct visit, such as inventory or asset verification (301.7605-1(d)(3)(iii)).

Clear need for an office exam outside an IRS office

The IRS will grant a request to hold an office exam somewhere other than an IRS office in a case of clear need, such as advanced age, infirm physical condition, or records too cumbersome to bring in (301.7605-1(c)(2)). The IRM separately directs examiners to make every effort to accommodate requests related to physical or mental disability, and notes the exam might even be done by correspondence if the issues allow (IRM 4.10.2.9.2).

Your representative's office

The location of your representative's business generally is not considered. But the regulation leaves the IRS discretion to transfer the exam there based on the factors above (301.7605-1(e)(3)), and the IRM recognizes a representative's office in your local commuting area as an alternative work place in some circumstances (IRM 4.10.2.9.2.1). Ask, but do not count on it.

The statute of limitations catch

Transfers take time, and the IRS protects its assessment deadline. If any applicable limitations period will expire within 13 months of your transfer request, the IRS may require you to agree in writing to extend the period by up to one year as a condition of an otherwise permissible transfer (301.7605-1(e)(4)). The campus exam manual similarly requires at least 13 months remaining, or a valid consent, before transferring a case to an area office (IRM 4.19.13.16).

Think before you sign that extension. Sometimes it is worth it. Sometimes the better move is to keep the exam where it is and finish it faster. That is a judgment call to make with advice.

Things the IRS does not have to do

• Transfer to an office without adequate resources to conduct the exam (301.7605-1(e)(5)).
• Conduct an exam at a location where there may be a possibility of physical danger to its employees (301.7605-1(f)).
• Schedule around your busy season. The regulation says it is reasonable for the IRS to schedule exams throughout the year without regard to seasonal fluctuations in your business, though it will work with you to minimize adverse effects (301.7605-1(b)(1)).

The IRS can also initiate a transfer itself if it would promote an effective and efficient exam, and you can object using the same factors (301.7605-1(g)).

Three examples

You moved. The return for the year under exam showed your old address, so the office exam was scheduled across the state. You now live in another district. Under 301.7605-1(e)(2)(i)(B), the IRS normally agrees to transfer the exam to the closest office in your new district. Send a written request with your current address and proof of residence.

The records are somewhere else. A field exam was scheduled at your home, but your business records are kept at your office across town. Under 301.7605-1(e)(2)(ii)(B), the IRS will agree to transfer the exam to where the books and records are maintained.

The business is too small to host it. You run a two-person shop in 400 square feet. A revenue agent working there all day would effectively shut you down. State that in writing with the facts. Upon verification, 301.7605-1(d)(3)(ii) moves the exam to an IRS office. Expect a short site visit anyway.

Notice what is not on the list: "I would rather not have the IRS at my business." Preference alone is not a ground. Facts are.

How to ask

1. Put it in writing. The regulation speaks of written requests.
2. Cite the provision. "Under 26 CFR 301.7605-1(e)(2)(ii)(B), my books and records are maintained at [address], and I request that the examination be transferred there."
3. Give facts, not adjectives. Addresses, distances, where records physically are, how many employees work in the space.
4. Ask early. Before the initial appointment if possible. The closer the statute date, the more likely you will be asked to extend it.
5. Be ready for a site visit anyway. Moving the meetings does not eliminate a tour if the examiner needs one.

For what happens once the location is settled, see office audits and field audits. Where an audit takes place shapes how it feels and sometimes how it goes. It is worth one well-written letter.