Got an IRS Audit Letter? Here's Exactly What to Do

Receiving an IRS audit letter is one of the most stressful financial experiences a person can have. The most important thing to know: do not panic, and do not respond without professional help. Here is exactly what to do.

Step 1: Read the Letter Carefully and Identify the Type

There are three main types of IRS audit notices:

• Correspondence audit (CP2000 / Letter 566): The most common type. The IRS is questioning a specific item — a number that does not match their records, a deduction they want documentation for. These are handled entirely by mail.
• Office audit: You are asked to bring documents to a local IRS office. More serious than a correspondence audit.
• Field audit: An IRS agent comes to your home or business. The most serious type, usually reserved for complex or high-income returns.

Step 2: Note the Response Deadline

IRS audit letters include a response deadline — typically 30 to 90 days. Missing this deadline results in the IRS making a determination without your input, almost always in their favor. Note the deadline immediately and contact a tax professional well before it arrives.

Step 3: Do Not Contact the IRS Directly

This is the most important instruction on this list. Every word you say to an IRS agent can and will be used in determining your tax liability. What seems like an innocent clarification can open up areas of your return that were not originally under scrutiny. A tax professional with a Power of Attorney speaks to the IRS on your behalf — you are not in the conversation at all.

Step 4: Gather All Relevant Documentation

The IRS is asking about something specific. Pull together every document related to that item — receipts, bank statements, mileage logs, contracts, invoices, cancelled checks. Organizing this documentation before your professional reviews the letter gives them everything they need to build the strongest possible response.

Step 5: Get Professional Representation

An experienced tax professional reviews the audit notice, analyzes your return, assembles the response with supporting documentation, and submits it to the IRS on your behalf. Most correspondence audits are closed with zero additional liability when responded to correctly and completely.

Common Reasons for IRS Audits

• Income discrepancy — a 1099 or W-2 the IRS received does not match your return
• Large or unusual deductions relative to income (home office, vehicle, charitable contributions)
• Self-employment income (Schedule C filers are audited at higher rates)
• Prior year issues that flagged your return
• Random selection — a small percentage of returns are audited at random
• Related party transactions — if someone you filed jointly with is audited

What Happens If You Owe Additional Tax

If the audit results in additional tax owed, you have options. You can pay the full amount, request an installment agreement, or — if you genuinely cannot pay — negotiate an offer in compromise to settle for less than the full balance. We advise on all resolution paths and help you choose the one that best fits your financial situation.

Back Taxes and Penalty Abatement

If you owe back taxes from an audit, the IRS typically adds failure-to-pay penalties (0.5% per month, up to 25%) plus interest. First-time filers with a clean compliance history may qualify for first-time penalty abatement — which can eliminate the penalty entirely. We apply for this on behalf of every qualifying client.

The Bottom Line

An IRS audit letter is serious, but it is not the end of the world. The outcome depends almost entirely on how you respond. Professional representation consistently produces better outcomes than self-representation — the IRS system is designed by lawyers, and navigating it alone is a significant disadvantage.

If you received an IRS notice, contact us immediately at (225) 396-5511. We review the notice for free and tell you exactly what it means and what it will take to resolve it.