IRS Audits: The Three Types, and Why Most of Them Are Just a Letter
The word “audit” frightens people more than the examination itself. I walk through the three types of IRS examination — correspondence, office, and field — explain why a CP2000 isn't an audit at all but an automated match, what actually triggers examinations, and the two letters you cannot miss: the 30-day letter and the Notice of Deficiency.
IRS Audits: The Three Types, and Why Most of Them Are Just a Letter
The word "audit" has a magical effect on people. An envelope arrives from the IRS, someone sees the word *audit*, and a whole movie starts playing in their head: agents at the door, cabinets opened, documents carted away, a courtroom at the end of it. People often write to me in exactly that state, and the first question is usually the same: "What happens to me now?"
Let's slow down. An audit is an examination, not an accusation. And here's the part almost nobody knows: the overwhelming majority of IRS examinations are correspondence — a letter asking you to back up one or two numbers. Nobody comes to your door.
Let's walk through what examinations actually exist, how they differ, and what to do in each case.
First — is this even an audit?
Very often what someone takes for an audit isn't one.
The letter that scares people most is CP2000. Formally, it isn't an examination at all — it's AUR (Automated Underreporter), an automated match. An IRS computer compared your return against what employers, banks, and brokers reported about you (W-2s, 1099s), spotted a discrepancy, and sent a proposal to assess more tax.
Why the distinction matters:
I've seen plenty of CP2000 notices where the IRS taxed the entire proceeds of a stock sale, because the broker reported gross proceeds and the cost basis was never shown on the return. On paper the person "owes" several thousand dollars; in reality they owe almost nothing.
The three types of real examinations
| Type | Where it happens | How deep it goes | Who runs it |
|---|---|---|---|
| Correspondence audit | By mail | One or two specific questions | Tax examiner |
| Office audit | At an IRS office | Several items on the return | Tax compliance officer |
| Field audit | At your home or business | The whole picture | Revenue agent |
Correspondence audit — the most common type by far. A letter arrives: substantiate this credit, show documents for this deduction, explain this line. You gather copies and mail them in or upload them through the IRS document portal. That's it. You never meet anyone in person.
Office audit — you're invited to a local IRS office with your documents. There are more questions and they're broader, and you're talking to an actual person. Usually it covers several related items: all of Schedule C, say, rather than a single line on it.
Field audit — the most serious. A revenue agent comes to your home, your business, or your representative's office and looks not at individual lines but at the whole system: your books, your bank accounts, your recordkeeping. This is mostly for businesses and complex situations.
What actually triggers examinations most often
In my experience, the letters come back to the same handful of causes:
Notice that none of these are about being foreign-born or holding an ITIN. They're about numbers that didn't reconcile.
Three possible endings
No change — you substantiated everything and the IRS changes nothing. More examinations end this way than people assume.
Agreed — the IRS assessed something and you agree. You sign a consent form, and from there it's purely a question of payment: in full, on an installment plan, or through other options.
Unagreed — the IRS assessed something and you don't agree. This is where it gets important, and where people most often lose their rights simply because they didn't understand what they received.
Two letters you cannot miss
The 30-day letter. It arrives after an examination if you disagree or didn't respond. It states what the IRS proposes to change and that you have 30 days to go to the independent IRS Independent Office of Appeals. This is your free shot at resolving the dispute without court.
The 90-day letter, also called the Notice of Deficiency. This is the formal notice of assessment. From the date of the letter you have 90 days — or 150 days if it's addressed outside the United States — to file a petition with the US Tax Court. The deadline is hard: it isn't extended because you were traveling, ill, or never opened the envelope.
And here's the mistake I see constantly: the letter sits unopened because it's in English and looks frightening. Three months pass — and the right to Tax Court is gone.
The clock runs from the date on the letter, not from the day you opened it.
What to do when a letter arrives
Don't panic, and don't ignore it. Those are the two most expensive options, and they're equally bad.
Find three things in the letter: the notice number (usually upper right — CP2000, Letter 566), the tax year at issue, and the response deadline. That alone tells you most of what's happening.
Respond on time and strictly to the point. If the IRS asks you to substantiate one line, send documents for that line — not five years of files. Extra material only widens the examination.
Keep everything. Copies of what you sent and proof that you sent it. Certified mail with return receipt costs a few dollars and has saved more than one person who was later told "we never received anything."
Don't reconstruct documents to fit. An error on a return is an error; it gets corrected. A fabricated document is a different story entirely — and there the statute of limitations doesn't apply at all.
Your rights during an examination
They're rarely discussed, and they're written directly into the Taxpayer Bill of Rights:
One more point if English isn't your first language: you are entitled to ask for an explanation you can actually understand. Never sign what you haven't understood — signing a consent form closes the door on disputing it.
In short
An examination is a procedure, not a verdict. It has rules, it ends, and at nearly every step you have the right to disagree.
If you have a letter from the IRS in hand and you don't understand what it means or how much time you have — don't face it alone. I work remotely with all 50 states. I'll help you obtain and read your transcripts (with your permission, through a Tax Information Authorization — Form 8821), explain what you actually received — a real examination or an automated match — calculate your deadlines, and help you gather and prepare your documents in response. I'll prepare and file the returns you need, including for past years. As an IRS Certifying Acceptance Agent, I can also help with an ITIN if you need one. And if your case calls for formal representation before the IRS, I'll bring in an authorized representative (an EA, CPA, or attorney) or work alongside one.
**Leave a request or book a review of your situation at fintaxes.us** — we'll go step by step through what to do in your specific case.
*This is educational material, not individual tax advice. Your situation may differ; for your specific case, seek a personal review.*
