Most taxpayers are happy to learn that the odds of being audited by the IRS are relatively low—about 1 in 200 for a typical 1040 filer. However, if you’re self‑employed, your chances increase significantly. You’re roughly 5% more likely to be audited than a wage‑earning employee, and the higher your income, the more attention your return may receive.

In general, the IRS has three years from the date you file your return to audit it. But there are important exceptions:

• If you understate income by 25%, the IRS gets six years.

• If you never file or file a fraudulent return, there is no deadline at all.

• The statute of limitations only begins after you file. Just another reason to always file your tax return!😉

Regardless of your risk level, it’s important to understand how IRS audits work and what to do if you receive a notice. Every audit, no matter the type, centers on two questions:

1. Did you report all income?

2. Were you entitled to the deductions and credits you claimed?

The IRS conducts audits in three ways: Correspondence Audits, Office Audits, and Field Audits.

Correspondence Audits (By Mail)

A correspondence audit is the IRS’s most common review method—about 80% of all audits happen by mail. These audits typically occur when the income on your return doesn’t match what was reported on a W‑2 or 1099. The IRS sends a letter requesting clarification and supporting documents, making this the least intrusive type of audit.

Key Tips for Correspondence Audits

• Most audits happen by mail; they are the easiest to resolve.

• Usually triggered by mismatched or unreported income.

• Respond promptly using the contact information on your notice.

• Send copies only, never originals—you won’t get them back.

• Keep organized records and photocopies of everything you send.

• Use certified mail with a return receipt for proof of delivery.

• If the auditor isn’t satisfied, you can request a transfer to your local IRS office for a face‑to‑face meeting.

• Transfers sometimes work in your favor—some cases are closed with no changes once reviewed locally.

Office Audits

An office audit begins with a letter sent to your last known address. The notice will either include a scheduled appointment or instruct you to call and set one up. It will also list the year under review and the documents you need to bring.

The IRS normally has three years to audit a return, so if the year listed is older, it may indicate a mistake—or that the IRS suspects a substantial understatement or potential fraud.

Helpful Advice for Office Audits

• Review your audit notice carefully before responding.

• When scheduling, request the latest available date to give yourself time to prepare.

• Try to schedule your appointment at the end of the week—auditors don’t receive overtime pay and may be motivated to finish efficiently.

• End‑of‑month appointments can also work in your favor because auditors must meet monthly case‑closing goals.

• Provide only documents related to the year under audit.

• Do not volunteer extra information beyond what is requested.

• If other years’ data is relevant (e.g., depreciation schedules), provide only the specific pages, not entire returns.

• Avoid letting the auditor photocopy your full records unless necessary.

• Never lie about unfiled returns, simply say you will check your records or have a tax professional respond.

• You are not required to provide copies of returns already on file with the IRS.

• Expect the audit to last 1–4 hours.

• If you prefer not to show a document, you can offer to send it later and reassess.

Field Audits (Most Serious Type)

A field audit is the IRS’s most in‑depth examination. You’ll know you’ve been selected if the IRS asks to meet at your home or business. Field audits are conducted by the IRS’s most experienced revenue agents, and the potential tax adjustments are significantly higher. Field audit tax bills are more than four times higher and the average field audit results in a $26,307 tax bill.

Most Beneficial Advice for Field Audits

• Never discuss an audit over the phone until you receive written notice.

• Avoid letting the auditor into your home or business if possible. Even innocent items can trigger deeper scrutiny.

• Choose the audit location strategically. You can request the audit be held at the IRS office or your tax professional’s office.

• Understand that everything is fair game. Field auditors can examine any part of your return or financial life.

• Expect heavy focus on unreported income. Agents use methods like bank deposit analysis, net worth changes, and spending patterns.

• Do your own bank‑deposit analysis before the audit. Note the source of each deposit so you can explain non‑taxable items like transfers, loans, or gifts.

• Control the audit environment. If the audit must occur at your business, don’t let the agent wander freely and remove anything that could raise questions.

• Exercise your rights under the Taxpayer Bill of Rights. You can request more preparation time, a different location, or help from the Taxpayer Advocate.

If an IRS notice just arrived in your mailbox and you’re unsure how to respond, reach out today. We’ll provide a free consultation and a clear estimate for representation/resolution services. 

Information in this article is adapted from the IRS publication IRS Enforcement, Appeals, and Taxpayer Rights (2024).