Please note that the content in this article is purely informational and should not be taken as professional or legal advice. Tax laws and regulations are subject to change without notice. Consult an experienced accounting team like Cedar Rapids Accountants John Freeman CPA before making any serious financial or legal decisions.
Everyone dreads a notice that states they are being audited by the IRS. However, just because you are being audited does not necessarily mean there is a problem. It just means they need more information to verify and substantiate your claim.
The IRS undertakes audits to review financial information to ensure reporting has been done correctly and that it is in accordance with tax laws. Most audits occur because of simple mistakes or errors. For example, failing to report a source of income on your return or incorrectly entering your income. Remember that income and other information are directly reported to the IRS, which they use to substantiate returns. When there is a discrepancy, that can trigger an audit.
The IRS uses several different methods to determine who is audited. The most common methods are random selection and related examinations. Random selection is based on a statistical formula, where tax returns are compared against “norms” or similar returns. This complex criterion then spits out a list of returns that are most likely to have errors. Whereas, related examinations are when your return is involved or associated with another tax return that is being audited, such as a business partner or investor.

Just because you are being audited does not mean you need to panic. Keep reading to learn what you can do if you’re audited by the IRS.
(Wondering “When to Hire a CPA”? Read our blog post for our best advice.)
What to do if you’re audited by the IRS
1. Understand what type of audit is being undertaken
The IRS undertakes audits in three different ways.
- By Mail. This is usually the simplest type of audit as it does not require you to meet with an auditor in person. Typically a mail audit will request additional documentation to verify items claimed on your return.
- Office audit. This is undertaken in person at a local IRS office. This usually involves a more in-depth investigation where the audit officer will ask you questions about the information on your return. You will be instructed on what documentation to bring with you. If you have a CPA, accountant or lawyer, it is advised that you bring them with you.
- Field audit. This occurs when an IRS agent comes to your house or place of business. This is less common but often more serious. A field audit usually means there are several aspects of your return in question.
2. Understand why you are being audited
It is important to review the information in detail that was provided to you by the IRS. This will tell you exactly what aspects of your tax return are being audited and why. This will help you determine what next steps need to be taken.

3. Gather the required information and/or documentation
You will need to gather all of the required information and documentation to support the areas of your claim that are in question by the IRS. In some cases, the IRS will request specific documents, while at other times you will have to identify and provide supporting documentation that can be used to verify specific claims.
4. Prepare your response to the IRS
It is important to provide the information and a response to the IRS exactly how they requested it. For most audits, you will need to prepare answers to specific questions regarding your finances and related activities. As well as, attach or send any supplementary documentation that can substantiate your claim.
5. Respond on time
It is advantageous to respond to the IRS as soon as possible. This is not a time to procrastinate, as you do not want to forget or let this linger. The quicker you respond, the sooner the audit will get resolved!
6. Consult a CPA tax professional
A CPA tax professional can eliminate almost all of the stress associated with an impending audit. CPAs are seasoned professionals when it comes to navigating audit requests from the IRS, they’ve seen it all! Their expertise and experience can help you better advocate for your tax return position and help to ensure a successful outcome.
The IRS can send out an audit letter up to three years after you’ve filed a tax return. Just to be safe, it is best to hold onto any documentation for at least five years before sending them to the shredder.
Getting audited by the IRS doesn’t have to be scary, follow our guide or contact us to learn more about the benefits of working with a CPA or with any questions you may have about being audited.