Let’s be honest—no one wants to get that letter from the IRS. The word “audit” alone can send a chill down your spine. But before you imagine the worst, take a deep breath: an audit isn’t necessarily a catastrophe. In fact, understanding how the process works—and being prepared—can go a long way toward making it manageable.
Here’s a closer look at what really happens during an IRS audit, and how you can handle it with confidence.
What Is an IRS Audit, Really?
First things first: getting audited doesn’t mean the IRS thinks you’re a criminal or a tax cheat. An audit, officially called an examination, is simply a review of your financial records to ensure your tax return is accurate and follows tax law.
In many cases, if your records are well-organized and you’re cooperative, you can resolve the issue fairly quickly. Problems tend to arise when records are missing, disorganized, or if you’re unresponsive or evasive.
How Does the IRS Notify You?
Here’s a critical piece of information: real IRS audits almost always begin with a letter—not a phone call or email. That letter will say your return has been selected for examination and will include the name and contact details of the IRS agent handling your case.
To confirm it’s legit, you can call the IRS using the information in the letter. With scams on the rise, this extra step can help protect you from fraudsters pretending to be IRS officials.
Types of IRS Audits
There are three main types of audits, each with its own level of complexity:
- Correspondence Audits
These are conducted entirely by mail and are the least invasive. Sometimes, they aren’t even full audits. For example, if the IRS notices a simple math error or unreported income, they may send a notice requesting payment or clarification. If you disagree, you can respond with supporting documentation.
A more involved correspondence audit includes an Information Document Request (IDR), asking for receipts or other proof for specific items on your return. Respond clearly and on time, and include explanations that tie your records to your tax filing.
- Office Audits
In this case, you’re asked to bring specific documents to a local IRS office. You’ll receive an IDR in advance outlining exactly what to bring. These audits go faster if your documents are organized—avoid showing up with a messy box of receipts. Neatly labeled binders or folders can make the process smoother for everyone involved.
- Field Audits
The most thorough kind, field audits happen at your home or business. You’ll get a detailed IDR beforehand, but be aware that agents might look beyond the listed items if they spot inconsistencies or red flags.
For business owners, be prepared to share your general ledger, balance sheet, and income statements. The auditor will likely compare these to samples of actual transactions to ensure everything adds up.
How to Handle the Audit Like a Pro
So, you’ve gotten the letter—now what? Here are some tips to make the process as painless as possible:
✅ Get Organized
Pull together all relevant financial documents—bank records, receipts, invoices, etc.—and make sure they align with your return. Organizing them into folders or binders can save everyone time and show you’ve got nothing to hide.
✅ Audit Yourself First
Revisit your tax return and test your own numbers. If you claimed deductions, make sure you have the paperwork to back them up. For business expenses, match your general ledger to actual payments. This helps refresh your memory and spot any errors before the IRS does.
✅ Be Honest and Cooperative
Don’t try to bluff your way through questions or hide information. If you don’t remember something, say so. Transparency builds trust—and reduces the odds of the agent digging deeper.
✅ Consider Professional Help
Hiring a tax professional—like a CPA, Enrolled Agent (EA), or tax attorney—can make a big difference, especially if your audit involves complex issues. They can speak the IRS’s language and help you avoid costly mistakes.
What Happens After the Audit?
Once the audit is complete, the IRS will send you a report with their findings. And here’s a surprise: sometimes, there are no changes at all—or you might even get a refund. If they do find discrepancies, you’ll be told how much more you owe (if anything), and you’ll have the chance to agree or appeal.
The IRS Appeals Office is a separate department designed to resolve disputes fairly, sort of like a mediator. And if you’re still not satisfied after that, you can take the matter to court.
Final Thoughts
Nobody looks forward to an audit, but it doesn’t have to be overwhelming. The key is to be prepared, stay calm, and approach the process professionally. Most importantly, remember that an audit is just a review—not a judgment on your character.
Being organized, responsive, and honest can help you navigate the experience successfully—and maybe even come out of it better prepared for future tax seasons.
Want help organizing your financial records or preparing for an audit? Reach out—we’re here to guide you through every step.
