IRS Audit: What to Do First
Step-by-step guide for receiving an IRS notice.
Don't Panic — But Act Promptly
Receiving an IRS notice is stressful, but ignoring it makes everything worse. Penalties and interest accrue, and the IRS can file liens or levies if you don't respond.
The good news: Most IRS notices are resolvable. With proper representation, you can often reduce penalties, establish payment plans, or resolve the matter discreetly.
Step 1: Read the Notice Carefully
IRS notices come in different forms:
- CP2000 — Proposed adjustment due to unreported income or mismatched documents
- Letter 226 — Proposed employer shared responsibility payment (ACA)
- Letter 525 — Audit notification
- CP501 — Reminder of balance due
- CP504 — Intent to levy
- LT11 / Levi — Final notice of intent to levy
Each notice has specific response requirements and deadlines. Missing a deadline can result in automatic assessment of proposed adjustments.
Step 2: Don't Respond Yet
Before you respond to the IRS, consult with a CPA, enrolled agent, or tax attorney. Anything you say can be used against you, and well-meaning responses can inadvertently admit to things that increase your liability.
Only a CPA, attorney, or enrolled agent may represent you before the IRS. Alan provides full representation and communicates directly with the IRS on your behalf — you're never alone in the room.
Step 3: Gather Documentation
Collect all relevant records:
- The IRS notice and any correspondence
- The tax return(s) in question
- Supporting documentation (W-2s, 1099s, receipts, bank statements)
- Any prior correspondence with the IRS
Don't send anything to the IRS until Alan has reviewed it. Premature documentation can create problems.
Step 4: Understand Your Options
Depending on the notice, you may be able to:
- Agree — Pay the proposed adjustment
- Disagree — Provide documentation to support your position
- Negotiate — Request penalty abatement or installment agreement
- Appeal — If the IRS doesn't agree with your position
Step 5: Respond by the Deadline
Most notices give you 30 days to respond. If you need more time, Alan can request an extension. But don't wait until the last day — the IRS is slow to process requests, and delays can trigger enforced collection.
Common Scenarios
Scenario 1: CP2000 — Unreported Income
The IRS matched your return against 1099s and W-2s and found a discrepancy. If the notice is correct, you owe the tax plus penalties and interest. If it's wrong, you can provide documentation to correct it.
Scenario 2: Audit Notification
The IRS wants to examine your return. Audits can be conducted by mail, in person, or at your office. Alan handles all communication and representation — you don't have to attend.
Scenario 3: Balance Due
You owe tax but can't pay in full. Alan can negotiate an installment agreement, offer in compromise, or currently not collectible status.
Scenario 4: Intent to Levy
The IRS is about to seize your wages, bank accounts, or property. Alan can request a Collection Due Process hearing and negotiate a resolution before the levy takes effect.
Next Steps
If you've received an IRS notice, contact Alan immediately. He reviews the notice, explains what it means, gathers necessary documentation, and communicates with the IRS on your behalf. Whether it's a simple correction or complex audit, his decades of experience ensures the best possible outcome.