IRS Audit Letter: What to Do Before You Respond

First, confirm that the letter is real

The IRS generally initiates a civil audit by mail. The IRS explains that it will contact taxpayers by letter and will tell them what information is being requested. That does not mean every envelope is safe. Tax scams often imitate urgency, official language, and payment pressure.

Start by checking the basics. Look for the notice or letter number, the tax year, your taxpayer identification details, the response deadline, the IRS contact information, and the specific items being examined. If the letter asks for payment by gift card, wire transfer, cryptocurrency, or any unusual method, stop. That is not how an IRS audit response works.

If the letter looks suspicious, use the IRS guidance on understanding an IRS notice or letter and verify through official channels before responding. Do not call a number from a suspicious letter if the letter itself may be fake.

Identify the kind of audit you are facing

Not every audit follows the same path. The IRS may conduct an audit by mail, at an IRS office, or through a field examination. In a mail audit, the letter usually asks for documents tied to specific items on the return, such as income, expenses, credits, or itemized deductions. If the records are too large or complex to mail, the IRS says a taxpayer may request a face-to-face audit.

That distinction matters because it changes the response strategy. A correspondence audit may require a focused packet of records and a clear explanation. An office or field audit may require more preparation, more control over documents, and a clearer plan for who speaks to the examiner.

The IRS audit overview and Publication 3498 on the examination process explain the basic stages of an examination. Read those materials for process, but read your own letter for what controls your deadline and requested response.

Mark every deadline before you draft anything

The deadline is not just an administrative detail. It tells you how much time you have to gather proof, request an extension, decide who should communicate with the IRS, and preserve options if the IRS proposes a change.

Many audit letters give a response date. Proposed adjustments and appeal rights may carry different dates. If the examination ends in proposed changes, the IRS may send a 30-day letter, often Letter 525, 915, or 950, transmitting the examination report and offering a chance to request review by the IRS Independent Office of Appeals. The stated deadline is administrative, but missing it can move the case forward without pre-assessment Appeals review. Follow the instructions in the actual letter and send any request to the office that issued it, not directly to Appeals.

A statutory notice of deficiency, often called a 90-day letter, is different because it starts the clock for filing a Tax Court petition. The Taxpayer Advocate Service explains that a notice of deficiency generally gives taxpayers 90 days from the date of the notice to petition the United States Tax Court, or 150 days if the notice is addressed outside the United States. The IRS generally cannot extend that petition deadline. If one arrives, review the firm's IRS 90-day letter guide immediately.

If the audit letter is close to a deadline, do not use the remaining time on a vague narrative. Decide whether you need an extension, whether the response can be narrowed, and whether a professional should step in before anything is sent. A late response can cause the IRS to disallow items, issue a proposed adjustment, or move the matter into a harder procedural posture.

See the Taxpayer Advocate Service page on the 90-day notice of deficiency and the IRS manual discussion of statutory notices of deficiency.

Read the issue, not just the tone

IRS letters can sound formal even when the issue is routine. They can also look plain while carrying a serious deadline. Do not judge the audit by how alarming the letter feels. Judge it by the tax year, dollars at stake, items being examined, penalties mentioned, and rights affected.

A request for proof of a charitable contribution is different from an audit of business income. A single-year document request is different from a multi-year examination. A mismatch notice is different from a field audit into entity records, payroll taxes, international reporting, or large basis calculations.

Build a short issue map before responding. What return is being examined? Which lines or forms are in question? What documents does the IRS request? What facts prove the taxpayer's position? What penalties could apply if the IRS disagrees? What deadlines control the next move?

The issue map also helps prevent a common mistake: answering the wrong question. A taxpayer may want to explain why the business had a hard year, but the IRS may be asking whether a specific expense was paid, ordinary, necessary, and tied to the business. A taxpayer may want to describe why a sale was fair, but the audit may turn on basis, holding period, character, or documentation. The response should meet the legal and factual issue the letter actually raises.

Gather records that answer the request

The strongest audit response is usually organized around the issues the IRS raised. If the letter asks about business expenses, gather invoices, receipts, bank records, mileage logs, contracts, calendars, and any workpapers that connect the expense to the return. If the issue is basis, gather purchase records, contribution records, closing statements, K-1s, capital account schedules, transaction documents, and prior-year return support.

Do not send a heap of records and make the examiner guess. A clean response package should make the point easy to see: the issue, the explanation, the documents, and how the documents support the number on the return. If records are missing, do not pretend they exist. Identify what is missing, what substitutes are available, and whether secondary evidence can support the position.

Be careful with documents that go beyond the request. Extra records can be helpful when they complete the story. They can also invite new questions if they are unfocused, inconsistent, or unrelated. Cooperation is important. Oversharing is not a strategy.

If the letter permits electronic submission, the IRS Document Upload Tool may be an efficient way to transmit responsive records. Keep a complete copy of the response exactly as sent, including the cover letter, exhibits, upload confirmations, postal receipts, fax confirmations, and notes from any calls. A well-kept response file becomes the foundation of any later protest or appeal.

Decide who should communicate with the IRS

Taxpayers can often respond directly to simple correspondence audits. That may be reasonable when the dollars are modest, the records are clear, and the issue is limited. The risk rises when the audit involves multiple years, business records, payroll tax, foreign accounts, penalties, potentially unreported income, or facts that could be misunderstood without context.

Communication control matters. An examiner's question may sound casual but still affect the theory of the case. A taxpayer may volunteer facts that are not responsive, make an uncertain estimate sound final, or frame an issue in a way that becomes hard to unwind later.

The IRS allows eligible representatives to act for taxpayers through Form 2848, Power of Attorney and Declaration of Representative. Representation is not automatically necessary in every audit, but it becomes more valuable when judgment, legal exposure, or procedural rights are involved.

Be careful with extension requests

Sometimes the IRS asks a taxpayer to extend the time for the government to assess tax. This often appears on Form 872 or a related consent form. An extension request should not be treated as a routine signature page.

Extending the assessment period can be useful. It may give time to develop the record, narrow the issues, pursue IRS Appeals, or avoid a premature notice of deficiency. It can also give the IRS more time to assess tax. The length of the extension, the tax years covered, the issues covered, and the procedural posture all matter.

Under Internal Revenue Code Section 6501(c)(4), the assessment period may be extended by written agreement. Taxpayers are not required simply to accept the IRS's proposed extension. The IRS must advise taxpayers of the right to refuse an extension or, where appropriate, limit it to particular issues or a particular period of time. The practical question is whether signing helps the taxpayer's position, whether the extension should be limited, and what happens if the taxpayer refuses.

Source details: see the IRS manual section on extension of the assessment statute of limitations.

Know when the audit is no longer routine

A routine audit usually has a narrow issue, clear records, manageable dollars, and no serious penalty or privilege concern. A higher-risk audit feels different. It may involve large proposed adjustments, years with incomplete records, aggressive deductions, shareholder or partner basis, employment tax, foreign reporting, cryptocurrency, unreported income, nominee or alter ego questions, or potential fraud indicators.

The more serious the audit, the more important it is to build the response around legal theory and proof. The goal is not to be difficult. The goal is to answer the audit in a way that preserves defenses, avoids unnecessary admissions, and keeps appeal options alive if the examiner disagrees and the case moves toward a 30-day letter or notice of deficiency.

This is also where privilege can matter. If the facts could become contested, think carefully before sharing sensitive communications broadly. A tax attorney can help determine what should be reviewed, what should be produced, and how the response should be framed.

When to involve a tax attorney

Tax counsel becomes more valuable when an examination involves significant dollars, multiple years, business or entity records, international reporting, substantial penalties, difficult legal issues, or facts that could affect a later appeal or litigation. Those cases require judgment about what the IRS is actually examining, what evidence supports the return, what should be produced, and how the response may affect the next procedural stage.

Galek Tax Law represents taxpayers in federal and California tax controversies, including examinations where the first response requires careful issue identification, control over communications, penalty analysis, or planning for an eventual appeal or litigation.

If you received an audit letter and the response is not obviously routine, review the firm's tax controversy services or schedule a consultation before the first response locks in the wrong strategy.

A practical first-response checklist

Start with the letter. Confirm that it is genuine, identify the notice or letter number, mark the deadline, and write down the tax year and issues being examined. Then decide what kind of audit it is and whether the matter is narrow enough to handle directly.

Next, gather only the records that answer the request. Build the response around the issue, not around every document in the file. Keep copies of everything sent, proof of mailing or upload, and notes of every call or message.

Finally, decide whether the audit has moved beyond routine compliance. If the case involves major dollars, multiple years, penalties, legal uncertainty, or appeal rights, get advice before responding. The first answer does not have to win the whole audit, but it should avoid making the case harder at the next stage, whether that stage is a 30-day letter, an Appeals conference, or a notice of deficiency.