How do I respond to an IRS notice (and what if they want to audit me)?

Automated adjustments notices can be divided into three categories:

• You’re getting less money than you expected.
• You’re getting more money than you expected.
• You owe money you didn’t expect.

If you agree with the IRS’s decision, follow their instructions, if any. If you made an error in your return, you can file an amended return to fix it. If you amend your return, contact the IRS to have the adjustment and the audit bill and interest waived.

If you believe the IRS made a mistake, you can dispute their finding. You have 60 days from the date of the notice to contact the IRS with questions or to dispute the notice. You’ll need to gather documentation to support your position (the IRS has examples of documents they ask for in audits that might be helpful). You can either call the IRS or send a letter to the address in your notice.

If you call the IRS:

• Review the IRS guidelines for phone calls before you call.
• Specifically, look at the info under IRS Phone Numbers.
• Prepare what you’re going to say and practice in advance.
• Limit your answers to the questions they ask. Bringing in more info may trigger further IRS investigation into your return.
• Write down the agent’s name, date and time of the call, documents you need to send, amounts either side agreed to pay, and due dates. Confirm them with the agent before you end the call.

If you write the IRS:

• Include a copy of the notice with your reply.
• Only respond to the issue in the notice. Additional info may trigger further IRS investigation into your return.
• Only send copies of documents with your reply, never originals. The only exception is a check if you’re submitting payment.
• Use the IRS barcoded envelope for the fastest processing.
• Send your letter by certified mail, return receipt requested to make sure you know the IRS received it.

If you continue to receive adjustment notices after talking or writing to the IRS, reply with copies of correspondence you already sent or details of your calls.

If you don’t hear anything or continue to get notices after 90 days, follow up by calling the number on the notice or the IRS Taxpayer Advocate Service.

In a correspondence audit, the IRS is checking something on your return. Common situations include looking at specific parts of your return or submitting additional documents to the IRS. There may not even be any changes to your return in a correspondence audit.

If you have questions about your correspondence audit, you can either call the IRS or send a letter to the address in your notice.

If you call the IRS:

• Review the IRS guidelines for phone calls before you call. Specifically, look at the info under IRS Phone Numbers.
• Prepare what you’re going to say and practice in advance.
• Limit your answers to the questions they ask. Bringing in more info may trigger further IRS investigation into your return.
• Write down the agent’s name, date, and time of the call, documents you need to send, amounts either side agreed to pay, and due dates. Confirm them with the agent before you end the call.

If you write the IRS:

• Include a copy of the notice with your reply.
• Only respond to the issue in the notice. Additional info may trigger further IRS investigation into your return.
• If the IRS asks for specific documents, review their guidelines for what they expect to see in specific types of documents.
• Only send copies of documents with your reply, never originals. The only exception is a check if you're submitting payment.
• Use the IRS barcoded envelope for the fastest processing.

Send your letter by certified mail, return receipt requested to make sure you know the IRS received it.

In an office audit, you’ll go to an IRS office to answer some questions. We recommend you hire a tax professional to help you with an office audit. Their experience and knowledge will help you get the best outcome.

If you choose not to have a tax professional help you, here are some tips:

• Confirm your appointment with the IRS, even if there’s an appointment date in your notice.
• Prepare and organize the documents the IRS has requested.
  • The IRS has a website with info they expect to see in each type of document and how to organize them.
  • Don’t bring documents that aren’t related to the issue in your notice.
• Make several copies of each document so you can provide them to the IRS during the meeting and keep your originals. Bring copies of the IRS notice, too.
• If you’ve lost records, the IRS has guidance on how to reconstruct them.
  • The IRS allows you to claim expenses up to $75 without providing a receipt, but claiming too many expenses without receipts may be disallowed.
• Always be respectful and honest. IRS auditors do this for a living and will likely know if you aren’t being honest.
  • Don’t get upset if you’re asked some personal questions. This is a normal part of evaluating your return.
  • If you don’t know the answer to a question or don’t have a document they want to see, ask for more time to gather info. Don’t make up an answer on the spot.
• Only answer the question asked and don’t volunteer additional info.
  • For example, limit your answer to the year the IRS is auditing and don’t talk about other years. The IRS can expand their audit to include other years or areas if you give them a reason to look at them.
  • Don’t make conversation before or after the audit. It’s understandable to be friendly, but the auditor might use something you say to expand the scope of their audit.
• If you realize during the audit you made a mistake, admit it and ask to amend your return. There may be penalties if you owe additional tax because of your amended return.

Take notes on any additional documents the IRS wants to see or due dates they give you. Confirm them with the auditor before the end of the meeting.

In a field audit, an IRS auditor will come to you to discuss things the IRS saw in your tax return. Field audits can be complicated because the IRS can ask about more than just what’s in the notice you received. You may wind up owing a lot of money in fines and interest if the audit doesn’t go your way.

We strongly recommend hiring a tax professional to help you with a field audit. They know how to respond to IRS questions and get you the best outcome. They can also arrange to have the audit in their office, which prevents the auditor from forming suspicions based on what they see in your home or business. The money you pay for a tax professional will likely be less than what you’d pay in fines and interest to the IRS.

The IRS has industry-specific guidelines for its auditors. They’re highly technical, but provide insight into the IRS' thinking and what they’re going to require from you.

Here are some tips for a field audit:

• Review your original tax return to see what might have triggered the audit. A tax professional can help you identify this.
• A difference between your income and expenditures often raises red flags with the IRS. Make sure you have documents proving the source of untaxable income.
• Check your math and theirs. If you find an error on the IRS' side, gather documents to support it.
• The IRS has a list of documents they might ask about and what info should be included.
• Organize your documents according to the IRS method in the document list.
  • Gather every receipt you can for expenses you claimed and review them against the IRS guidelines for deducting expenses.
  • The IRS allows you to claim expenses up to $75 without providing a receipt, but claiming too many expenses without receipts may be disallowed.
  • Include summaries of each type of expense as the auditor will want those.
  • Have proof of payment for each document.
• Make copies of each document so you can provide them to the IRS during the meeting and keep your originals.
• If you’ve lost records, the IRS has guidance on how to reconstruct them.
• Always be honest. IRS auditors do this for a living and will likely know if you aren’t being honest.
  • If you don’t know the answer to a question, ask for more time to gather info.
  • Don’t make up an answer on the spot.
• Answer the question asked and don’t volunteer additional info.
  • Don’t make conversation before or after the audit. It’s understandable to be friendly, but the auditor might open a new avenue of investigation based on something you say.

If you realize you made a mistake, admit the mistake and ask to amend your return. There may be penalties if you owe additional tax because of your amended return.