Most IRS Notices Are NOT Audits
The IRS sends millions of notices per year. Most are:
- CP2000: Proposed changes because income reported by third parties (employers, banks) differs from your return
- CP14: Balance due notice
- CP501/CP503: Reminder to pay a balance
- LT11: Final notice before levy action
- Notice 1444: Economic impact payment notice
Types of IRS Audits
Correspondence audit (most common, ~70% of all audits):
- Conducted entirely by mail
- IRS requests documentation for one specific item
- Typically resolved by submitting records
Office audit:
- You visit an IRS office
- More in-depth; multiple issues may be examined
Field audit:
- IRS agent comes to your home or business
- Rare; reserved for complex or large returns
What Triggers an Audit?
- Unusually large deductions relative to income
- Inconsistency with information third parties reported to IRS
- Schedule C losses year after year
- Rounding numbers (use exact figures)
- Home office deduction with unusual percentage
- High cash business income
What to Do When You Receive an IRS Letter
- Don’t panic — read the notice carefully
- Respond by the deadline — ignoring it makes things worse
- Gather supporting documents — receipts, bank statements, tax forms
- Respond in writing — keep copies of everything
- Consider professional help for amounts over $10,000 or complex issues
Your Rights During an Audit
The IRS Taxpayer Bill of Rights guarantees:
- Right to be informed
- Right to quality service
- Right to pay no more than correct amount
- Right to challenge and appeal
- Right to retain representation (CPA, Enrolled Agent, tax attorney)