What Happens If Your Taxes Get Audited by the IRS?

If your taxes get audited by the IRS, you’ll first learn about it through a letter in the mail identifying the tax year and the specific items under review. From there, you send documentation or meet with an examiner, the IRS decides whether your return holds up, and the case closes with either no change, an agreed adjustment (plus tax, interest, and possibly penalties), or a disagreement you can appeal. Most audits end with either no changes or a manageable adjustment, but the process can take months and the numbers climb quickly if you’re unprepared.¹

How You’ll Find Out

Every audit begins with a written notice sent through the U.S. Postal Service. The IRS does not start audits by phone, email, or text. Anyone contacting you that way and demanding payment is running a scam.¹

The letter tells you which tax year is being examined, which items on the return the IRS is questioning, and which of three audit types you’re dealing with:

A correspondence audit is handled entirely by mail. It’s the most common type, and it usually focuses on one or two items such as a specific deduction or credit. You respond by sending in the documentation the letter requests.²
An office audit brings you to a local IRS office for an in-person meeting. These cover more complex issues, and you bring documentation to the appointment.
A field audit sends a revenue agent to your home, business, or accountant’s office. Field audits are reserved for the most complex individual and business returns.¹

One notice worth distinguishing: a CP2000 looks alarming but is not technically an audit. It’s an automated letter the IRS sends when income reported by employers or financial institutions doesn’t match what you put on your return, and you can usually resolve it by explaining the discrepancy or sending documentation.³

What the Audit Itself Looks Like

Start gathering records the day you open the notice. Because the letter identifies exactly which items are in question, focus your effort there: receipts, bank statements, canceled checks, invoices, and any logbooks that support the line items or schedules the IRS listed. Organize everything by the item it backs up on your return, and compare your documents against what you actually reported before you respond. If your records don’t fully support something you claimed, you want to know that before the examiner does.

You have the right to have a tax professional handle the entire audit for you. A CPA, enrolled agent, or tax attorney can represent you under a Power of Attorney using IRS Form 2848, and the IRS cannot require you to attend the audit personally as long as your representative is present.⁴ This matters more than most people realize. A good representative keeps the conversation focused on what the examiner asked for, rather than volunteering details that could open new questions.

In a correspondence audit, you mail in your documentation and wait. The IRS reviews what you sent and responds with a determination, sometimes asking for additional records before closing the case.

In an in-person audit, the examiner confirms the scope at the start, and you or your representative present the documentation supporting each questioned item. The examiner verifies your income, deductions, and credits against that evidence and asks questions about the underlying transactions. The scope in your initial letter sets the starting boundaries, but examiners can expand beyond them with supervisory approval if they find related issues during the review. That is a big reason experienced representatives answer only what was asked. At the end, the examiner discusses preliminary findings item by item, and this is your chance to counter proposed adjustments with additional evidence before anything becomes final.

The response deadline in the letter is real, but you can request a reasonable extension if you need more time to pull records together. Don’t rush a response just to meet the date if your documentation isn’t ready.

Your Rights During an Audit

Federal law gives you specific protections. You can have a representative handle the audit entirely on your behalf, and you can pause an interview at any time to consult an attorney, CPA, or enrolled agent.⁵

You can make an audio recording of any in-person interview using your own equipment at your own expense, as long as you notify the IRS in advance. If the IRS wants to record, they must tell you beforehand and give you a copy or transcript on request.⁵

You also have the right to know why the IRS is asking for a particular piece of information, to appeal a disagreement through the IRS Independent Office of Appeals, and to take your case to court if the administrative process doesn’t resolve it.⁶

How the Audit Ends

Every audit closes one of three ways:

No change. The IRS accepts your return as filed, sends a letter confirming no adjustments, and closes the case. This is more common than people assume for well-documented returns.
Agreed change. You accept the examiner’s proposed adjustments and sign a consent form allowing the IRS to assess the additional tax and interest. Signing that form waives your right to appeal those items through the Office of Appeals or petition the Tax Court on them.
Disagreed change. You don’t accept the adjustments, and the case moves toward the appeals process.

A common misconception: signing the agreement does not stop interest from accruing. Under federal law, interest runs from the original due date of the return until the date you actually pay.⁷ If you agree with the changes, pay as quickly as you can to limit what compounds.

What You’ll Owe if the IRS Finds a Deficiency

When an audit produces additional tax, the IRS typically adds interest and penalties on top of it.

Interest

Interest on an underpayment runs from the original due date of the return, not from the date the audit concludes. For the first quarter of 2026, the individual underpayment rate is 7% per year, compounded daily, and the rate is recalculated each quarter based on the federal short-term rate plus three percentage points.⁸ A deficiency from a return you filed three years ago already carries three years of compounding before the audit even wraps up. Interest cannot be waived through penalty abatement or reasonable cause arguments.

Accuracy-Related Penalty

If the IRS determines the underpayment resulted from negligence or a substantial understatement of income, the penalty is 20% of the underpaid amount. A substantial understatement exists when you understate your tax by the greater of 10% of the tax that should have been shown or $5,000.⁹ If you claimed the qualified business income deduction, that threshold drops to 5% of the required tax.¹⁰

Civil Fraud Penalty

In serious cases where the IRS can prove the underpayment was due to fraud, the penalty jumps to 75% of the portion attributable to fraud.¹¹ The fraud penalty replaces the 20% accuracy-related penalty on the same dollars rather than stacking on top of it. The burden of proving fraud rests on the IRS.

Penalty Abatement

You can request penalty abatement if you had reasonable cause for the error and acted in good faith. Common grounds include reliance on professional tax advice, serious illness, or destruction of records in a natural disaster. The IRS evaluates these case by case, and abatement does not reduce interest.

Paying What You Owe

If you can’t pay the full balance immediately, the IRS offers several arrangements, and interest and penalties keep running under all of them.

A short-term payment plan lets you pay within 180 days with no setup fee.¹²
A long-term installment agreement spreads payments over a longer period, with lower setup fees for direct debit and online applications and possible fee reductions for low-income taxpayers.¹²
An offer in compromise lets you propose a settlement for less than the full amount if you genuinely cannot pay. The IRS evaluates your income, expenses, and asset equity against what it could reasonably expect to collect. The application fee is $205, and you must be current on required filings and not in an open bankruptcy.¹³

Offers in compromise have a low acceptance rate. The IRS won’t approve one if it believes you can pay the full amount through an installment agreement, and its math focuses on what your assets are worth and what your future income can support.

If You Disagree With the Findings

You don’t have to accept the examiner’s changes. The dispute process has an administrative phase inside the IRS and a judicial phase in court.

The 30-Day Letter and Appeals

When you and the examiner can’t agree, the IRS issues a 30-day letter with a report detailing the proposed adjustments. You have 30 days from the date of that letter to file a written protest requesting a hearing with the IRS Independent Office of Appeals.¹⁴ The protest goes to the office that sent the letter, not directly to Appeals.¹⁵

The Tax Court is the only venue where you can dispute the IRS’s determination without paying the tax first.⁶ You can also pay the deficiency and then file a refund claim; if the IRS denies it or doesn’t act within six months, you can sue in a U.S. District Court or the U.S. Court of Federal Claims.¹⁷

What Happens if You Ignore the Audit

Ignoring the notice is the worst move available. If you don’t respond to a correspondence audit, the IRS disallows the questioned deductions or credits and assesses additional tax based on its own calculations. You lose the chance to present documentation, and the IRS has no reason to give you the benefit of the doubt.

For in-person audits, skipping the meeting produces the same result. The examiner closes the case using the information available, which almost always means the maximum adjustment. The IRS then runs its standard collection path: a 30-day letter, a 90-day letter if you still don’t respond, and an assessed deficiency that moves to the collection division, where liens and wage garnishment are on the table and your appeal options have narrowed sharply.

If you feel overwhelmed, requesting an extension or calling the number on the letter is always better than silence. The IRS routinely grants reasonable delays for taxpayers who are engaging with the process.

How Far Back the IRS Can Reach

The IRS doesn’t have unlimited time. Under the general rule, it must assess any additional tax within three years after you filed the return. Early filing starts the clock on the due date; late filing starts it on the actual filing date.¹⁸

The window stretches to six years if you omitted from gross income an amount exceeding 25% of the gross income reported, or if the omission exceeds $5,000 and involves assets subject to foreign financial reporting requirements.¹⁸ If you filed a fraudulent return or never filed at all, there is no time limit.

Match your record retention to those windows. The IRS recommends keeping records that support a return for at least three years after filing, six years if there’s any chance of a substantial income omission, and seven years if you claimed a deduction for worthless securities or bad debt. Records for property transactions should be kept until the limitations period expires for the year you sell or dispose of the property.¹⁹

1
Internal Revenue Service. IRS Audits
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Taxpayer Advocate Service. Lifecycle of a Tax Return – Correspondence Audits
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Internal Revenue Service. Understanding Your CP2000 Series Notice
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Internal Revenue Service. About Form 2848 – Power of Attorney and Declaration of Representative
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Office of the Law Revision Counsel. 26 USC 7521 – Procedures Involving Taxpayer Interviews
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Internal Revenue Service. Taxpayers Have the Right to Challenge the IRS’s Position on Their Taxes
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Office of the Law Revision Counsel. 26 USC 6601 – Interest on Underpayment, Nonpayment, or Extensions of Time for Payment, of Tax
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Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
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Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
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Internal Revenue Service. Accuracy-Related Penalty
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Office of the Law Revision Counsel. 26 USC 6663 – Imposition of Fraud Penalty
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Internal Revenue Service. Payment Plans – Installment Agreements
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Internal Revenue Service. Offer in Compromise
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Internal Revenue Service. Letters and Notices Offering an Appeal Opportunity
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Internal Revenue Service. IRM 4.8.9 Statutory Notices of Deficiency
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Internal Revenue Service. Taxpayer Bill of Rights – The Right to Appeal an IRS Decision
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Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
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Internal Revenue Service. How Long Should I Keep Records?