IRS Audit: What to Expect, Step by Step

An IRS audit sounds like a courtroom drama, but most are handled entirely by mail and focus on a few specific items on your return. Knowing what to expect takes most of the fear out of it. This guide explains how the IRS picks returns, the three types of IRS audit, how far back the IRS can look, what documents to gather, your rights at every step, and what happens if you disagree with the result, including what it means for your Virginia return.

How the IRS picks returns for an audit

An IRS audit (the IRS calls it an "examination") is a review of your return to confirm that income, deductions and credits are reported correctly. The IRS says it selects returns through random selection and computer screening, which compares your return against statistical norms for similar returns, and through "related examinations," when your return is connected to someone else's that is being audited, such as a business partner's or an investor's.

Being picked doesn't mean the IRS thinks you did anything wrong. In its 2025 Data Book, the IRS reported that it had examined 0.36% of individual returns filed for tax years 2015 through 2023, about 1 in 280. For returns reporting $10 million or more of total positive income, the figure was 7.9%. Rates for recent years can still rise, because those returns are still within the audit window.

The three types of IRS audit

Correspondence audits dominate. In fiscal year 2025, the IRS closed 497,621 audits; 81% were conducted by correspondence and 19% face to face. Field exams were far fewer but produced most of the recommended additional tax: $19.1 billion, versus about $7.7 billion from mail audits.

The IRS will contact you by mail before any in-person meeting. Revenue agents conducting field audits carry two forms of official IRS identification, and you can ask to see both.

How far back can the IRS audit?

The IRS has a limited window, called the assessment statute, to audit a return and assess more tax. The clock generally starts when you file (a return filed early counts as filed on the due date).

• Three years is the general rule. The IRS says audits generally include returns filed within the last three years.
• Six years applies if you didn't report income that you should have, and it's more than 25% of the gross income shown on your return. If the IRS finds a substantial error, it may add years, but it says it usually doesn't go back more than six.
• No limit applies if you never filed a required return or filed a false or fraudulent return to evade tax.
• Collection is a separate clock: once tax is assessed, the IRS generally has 10 years to collect it.

Those windows also tell you how long to keep records. The IRS recommends at least three years for most records, six if the 25% rule could apply, and seven if you claim a loss from worthless securities or a bad debt. Keep property records until the window closes for the year you sell.

The IRS audit process, step by step

1. The letter arrives. For a mail audit, the first letter is commonly Letter 566. It lists the specific items being questioned and the documents the IRS wants. Read it twice and note the due date.
2. You respond. Send organized copies, with your name and taxpayer ID on each page, by the due date. If you need more time on a mail audit, the IRS says it can ordinarily grant a one-time automatic 30-day extension if you ask before the deadline. If you don't respond at all, the questioned items are disallowed and you'll receive a report proposing the tax change.
3. The examiner reviews. The examiner may accept your return as filed, ask for more information, or propose changes. Office and field audits involve a meeting where you, your representative, or both walk through the records.
4. You get the results. Proposed changes arrive in an examination report (Form 4549) with a "30-day letter," such as Letter 525 for mail audits or Letter 915 for in-person audits.
5. You agree, or you appeal. If you agree, you sign. If you don't, you have appeal options, covered below. Ignoring the 30-day letter leads to a notice of deficiency, the legal notice that starts the Tax Court clock.

Documents to gather for an IRS audit

Send exactly what the letter asks for, organized by the item it relates to. A clean, labeled packet is easier for an examiner to accept than a shoebox of receipts. Depending on the items under review, that may include:

• A copy of the return under audit, plus the audit letter and any questionnaire it included.
• W-2s, 1099s and K-1s for that year, and bank or brokerage statements that tie to reported income.
• Receipts, canceled checks or card statements for questioned deductions, with a short note explaining the business or tax purpose.
• Mileage logs and calendars for vehicle or travel expenses.
• For dependents and family credits: school, medical or lease records showing where a child lived, and records of support.
• For a business: the general ledger, profit and loss statement, bank reconciliations, invoices and payroll records. Tidy books make this far easier; see our small business bookkeeping guide.
• For home-related items: the closing statement, Form 1098 and improvement receipts.

Your rights during an IRS audit

The Taxpayer Bill of Rights applies throughout an audit. The IRS lists ten rights:

1. The Right to Be Informed
2. The Right to Quality Service
3. The Right to Pay No More than the Correct Amount of Tax
4. The Right to Challenge the IRS's Position and Be Heard
5. The Right to Appeal an IRS Decision in an Independent Forum
6. The Right to Finality
7. The Right to Privacy
8. The Right to Confidentiality
9. The Right to Retain Representation
10. The Right to a Fair and Just Tax System

In practice, that means you can be represented by yourself or an authorized representative, using Form 2848 or another proper written authorization, and you can appeal disagreements both within the IRS and in court. It also means the IRS should explain its proposed changes in writing, and you're entitled to know when an audit is finished.

Audit outcomes and how to appeal

The IRS says an audit can end in one of three ways:

Appealing within the IRS

The IRS Independent Office of Appeals is separate from the office that audited you. You generally have 30 days from the date of the 30-day letter to request an appeal. If the total proposed tax and penalties is $25,000 or less for each tax period, you can file a small case request (Form 12203). Larger amounts need a formal written protest explaining which items you disagree with, why, and the law that supports you. Send it to the address on your letter, not directly to Appeals. Fast Track Mediation, with a trained Appeals mediator, is another option for many disputes.

Going to Tax Court

If you don't respond to the 30-day letter or can't reach agreement, the IRS issues a notice of deficiency (the "90-day letter"). You then have 90 days (150 if it's addressed to you outside the U.S.) to petition the U.S. Tax Court. If the disputed amount is $50,000 or less for any one year, you can ask for the simpler small tax case procedure. Missing the 90-day deadline generally means losing the chance to dispute the tax in Tax Court before paying it.

If you agree with the result but can't pay the bill in full, you have options. See our guide to IRS payment plans and other options.

Virginia audits and how they connect to the IRS

Because Virginia income tax starts from your federal adjusted gross income, an IRS audit that adds income almost always adds Virginia tax too. Plan for both when you're budgeting for the result.

How having help changes an IRS audit

You can handle a simple mail audit yourself. Many people do. But a knowledgeable second set of eyes often makes the process faster and less stressful, especially when the audit covers business income, several years, or items you can't fully document.

• Scoping the request. Reading the letter precisely so you send what's needed and nothing that invites new questions.
• Organizing the evidence. Turning bank statements, receipts and logs into a clear packet tied to each item under review.
• Handling communication. With your written authorization, a representative can speak with the IRS for you, so you aren't fielding calls at work.
• Tracking deadlines. Extension requests, 30-day letters and the 90-day Tax Court window all have hard dates.
• Fixing Virginia afterward. Filing the amended Virginia return so a federal change doesn't turn into a surprise state bill later.

Timeless Tax helps individuals and small businesses in Fredericksburg, Spotsylvania, Stafford and the surrounding area prepare for and respond to IRS and Virginia audits. Learn how our audit representation service works, and bring your audit letter and the return in question to your first appointment.

Written by the Timeless Tax & Accounting teamTimeless Tax & Accounting was founded in 2020 by Nagham Alobaidi and serves clients across Virginia and in other states, in English and Arabic. Reviewed for accuracy against IRS and Virginia Tax guidance as of October 2, 2026.

This page is general information, not tax, legal or financial advice for your specific situation. Tax rules change often — talk with a professional before acting.