How to Respond to an IRS Audit Letter — Step-by-Step Guide
Most IRS audits are conducted entirely by mail and are far less dramatic than people fear. Understanding what type of audit you have received and responding correctly is the key to a favorable outcome.
Types of IRS Audit Letters
The IRS conducts three main types of audits: correspondence audits (conducted entirely by mail, the most common), office audits (you visit an IRS office), and field audits (an IRS agent visits your home or business). Most individual taxpayers and small businesses receive correspondence audits requesting documentation for specific line items.
What IRS Audit Letters Look Like
IRS audit letters will contain your name and address, the tax year under review, the specific items being questioned, a deadline to respond (usually 30–60 days), and instructions for what documents to provide. They come from specific IRS departments, most commonly the Automated Underreporter (AUR) unit or the Examination Division.
Common Triggers for IRS Audit Letters
High deductions relative to income, unreported 1099 income, home office deductions, charitable contribution deductions without substantiation, business losses across multiple years, and mismatches between your return and information reported by employers or financial institutions are all common audit triggers.
How to Respond Correctly
Gather all documentation supporting the items in question. Organize your response clearly — do not send original documents, only copies. Write a concise cover letter explaining each item. Send your response via certified mail with return receipt to create a paper trail. Never ignore an audit letter — the IRS will assess additional tax, penalties, and interest if you do not respond.
What Happens After You Respond
If the IRS accepts your documentation, they will close the audit with no change. If they partially accept it, they will issue an adjusted assessment. If they disagree, you will receive a 30-day letter allowing you to appeal, and ultimately a 90-day letter (statutory notice of deficiency) giving you the right to petition the Tax Court before paying.
Real-World Example
A self-employed contractor in Santa Monica received a correspondence audit questioning $14,800 in business deductions. She had receipts and bank statements but they were poorly organized. We compiled a clean, documented response package and submitted it within the deadline. The IRS accepted all but $1,200 in undocumented entertainment expenses, resulting in a small additional assessment — far better than the $5,900 they initially proposed.
IRS Audit Help in Santa Monica and Los Angeles
Calculus Tax, Inc. provides IRS audit representation for individuals and businesses in Santa Monica, Los Angeles, and all of LA County. Call (310) 598-3759 or visit 1050 W. Alameda Ave., Burbank, CA 91506.
Frequently Asked Questions
Do I need a tax professional to respond to an audit letter?
Not always. Simple correspondence audits requesting documentation for a single item can often be handled by the taxpayer. However, complex audits, audits involving multiple years, or those with significant proposed adjustments benefit greatly from professional representation.
What if I cannot meet the audit response deadline?
Call the IRS number on the letter and request an extension before the deadline. Extensions are generally granted for 30–60 additional days with a reasonable explanation.
Can the IRS audit a closed year?
The IRS generally has 3 years from the due date of a return to audit it. This extends to 6 years if more than 25% of income was omitted, and there is no statute of limitations for fraudulent returns.
What if the IRS finds something during the audit?
If the audit results in additional tax owed, you have the right to appeal the findings. You can request an audit reconsideration if you have new information, or petition Tax Court within 90 days of receiving a statutory notice of deficiency.
Will my audit result in criminal charges?
Correspondence and office audits are civil examinations, not criminal investigations. Criminal tax fraud investigations are conducted by IRS Criminal Investigation (CI) and are entirely separate. The vast majority of audits result in civil adjustments only.
How long does an IRS audit take?
Correspondence audits typically resolve in 3–6 months from initial response. Office and field audits can take 6–18 months depending on complexity.
How to Respond to an IRS Audit Letter — Step-by-Step Guide Services in Los Angeles
Calculus Tax, Inc. provides how to respond to an irs audit letter — step-by-step guide services to individuals and businesses throughout Los Angeles County. Our licensed CPAs are based in Burbank and serve clients in Santa Monica and surrounding communities.
Our Burbank office serves clients throughout Los Angeles County including Los Angeles, Long Beach, Santa Monica, Glendale, Burbank, and more.
Ready to Resolve Your Tax Problem?
Calculus Tax, Inc. has helped hundreds of Los Angeles individuals and businesses resolve IRS debt, audits, and collection actions. Our licensed CPAs fight for the best possible outcome.