Audit
An IRS review of your tax return to verify that income and deductions are reported accurately. Audits can be conducted by mail, at an IRS office, or at your home or business.
A tax audit is an examination of your return by the IRS to verify that your reported income, deductions, and credits are accurate and comply with tax law. Only about 0.4% of individual returns are audited in a typical year, though certain factors increase the likelihood — such as high income, large charitable deductions relative to income, significant Schedule C losses, or unreported 1099 income.
There are three main types of audits: correspondence audits (by mail, for simple issues like missing documentation), office audits (at an IRS office, for moderately complex issues), and field audits (at your home or business, for the most complex cases). Correspondence audits are by far the most common.
If you are audited, you have the right to representation (by a CPA, enrolled agent, or tax attorney), the right to appeal any findings you disagree with, and the right to know why the IRS is asking for information. The IRS generally has three years from the filing date to audit a return, extended to six years if there is substantial understatement of income (more than 25%) and indefinitely for fraud or failure to file.
How it works
An audit is the IRS examining your return to verify that reported income, deductions, and credits actually match your records and comply with tax law. Only a small share of individual returns — about 0.4% in a typical year — get audited, but certain patterns raise the odds: high income, charitable deductions that look large relative to income, Schedule C losses claimed repeatedly, or income reported to the IRS on a 1099 that never showed up on your return.
You experience an audit in one of three forms — a correspondence audit conducted entirely by mail for a narrow, simple issue like missing documentation for one deduction; an office audit at a local IRS office for something moderately complex; or a field audit, where an agent visits your home or business, reserved for the most complex cases. Correspondence audits, by far the most common, usually just ask you to substantiate a specific item with receipts or records.
Being audited does not mean you did something wrong — many audits close with no change once documentation is provided. You have the right to representation by a CPA, enrolled agent, or tax attorney, and the right to appeal any findings you disagree with. The IRS generally has three years from your filing date to open an audit, but that window extends to six years if you understated income by more than 25%, and there is no time limit at all for fraud or a failure to file.
Example: a correspondence audit for a missing 1099
A taxpayer receives an IRS letter noting that a 1099-NEC reporting $4,000 of freelance income was not included on their filed return, even though a payer had reported it to the IRS.
This is handled entirely as a correspondence audit — the taxpayer responds by mail, either agreeing and paying the additional tax owed on the $4,000, or providing documentation showing the income was already reported elsewhere on the return.
Frequently asked questions
What triggers an IRS audit?
How far back can the IRS audit my return?
What's the most common type of IRS audit?
Related Terms
Tax Return
The form(s) you file with the IRS to report income, claim deductions and credits, and calculate your tax liability or refund. For individuals, this is Form 1040.
Amended Return
A corrected tax return (Form 1040-X) filed to fix errors or omissions on an original return, such as unreported income, missed deductions, or incorrect filing status.
IRS (Internal Revenue Service)
The federal agency responsible for collecting taxes and enforcing tax laws in the United States. The IRS processes tax returns, issues refunds, and conducts audits.
Penalty
A charge imposed by the IRS for filing late, paying late, or underpaying estimated taxes. Common penalties include failure-to-file (5% per month) and failure-to-pay (0.5% per month).