An IRS examination is a legal proceeding, even when it arrives as a polite letter. The examiner's job is to determine whether the tax reported was correct. Your job — or your representative's — is to make sure the determination is based on the law and the facts, and nothing else.
Types of IRS examinations
A correspondence audit is conducted entirely by mail and usually focuses on one or two items: a deduction, a credit, unreported income shown on a third-party form. These are the most common examinations and the easiest to mishandle, because the taxpayer tends to send whatever is asked for without considering what it shows. An office audit takes place at an IRS office with a Tax Compliance Officer and typically covers several issues on an individual return. A field audit is conducted by a Revenue Agent at your home, your business, or your representative's office, and is the most thorough; business returns, large or complex individual returns, and returns with substantial Schedule C or rental activity are most often examined this way.
Your rights in an examination
The Taxpayer Bill of Rights, codified at §7803(a)(3), guarantees the right to representation, the right to be informed, the right to pay no more than the correct amount of tax, and the right to challenge the IRS's position and be heard. In practical terms: you may designate an attorney to deal with the IRS on your behalf, and once a Form 2848 power of attorney is on file, the examiner is required to communicate through your representative. You are not required to attend an interview if you are represented. You may record an in-person interview with advance notice. And you are entitled to know what the examiner is looking at and why.
How the firm handles an examination
We start with the transcripts and the return itself, so we understand what the IRS already has and where the exposure is before anyone responds. We then take over all communication. Every document request is reviewed before it is answered, and the response is organized to address the question asked — complete, but not expansive. Where the examiner proposes an adjustment we disagree with, we respond in writing with the legal authority and the supporting records. Where an adjustment is correct, we say so, and we focus on limiting penalties and resolving the case efficiently.
If the examination closes with findings you do not agree with, you receive a 30-day letter and the right to protest to the IRS Independent Office of Appeals, which is separate from the examination division and resolves most cases without litigation. If that does not resolve it, a Notice of Deficiency (the 90-day letter) gives you the right to petition the United States Tax Court before paying the disputed tax. We represent clients at every one of those stages.
What the firm does on an audit engagement
- Form 2848 power of attorney so that the IRS communicates with the firm, not with you
- Pre-response analysis of transcripts, the return under examination, and related years
- Preparation and review of every document production before it goes to the examiner
- Attendance at all office and field interviews on your behalf
- Written responses to proposed adjustments, citing the Code, Regulations, and case law where the examiner is wrong
- Negotiation of penalty issues, including accuracy-related penalties under §6662
- Protest to the Independent Office of Appeals, and petition to the United States Tax Court where necessary
- Audit reconsideration for assessments that were made without your participation
Unfiled returns
Many examinations begin with a return the IRS prepared for you — a Substitute for Return under §6020(b) — because you did not file. A substitute return allows no deductions, no exemptions, and no favorable filing status, and it almost always overstates the tax. Filing an accurate original return to replace it is often the single most effective step in these cases, and it is one we handle routinely alongside the examination itself.