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Pro Tip – Review These Items Before Meeting with IRS for an Audit in 2025

If you’ve received an IRS audit notice for 2025, it’s understandable to feel a bit overwhelmed. However, it’s important not to panic. There are key steps you can take to ensure you’re prepared and can handle the situation effectively. 

John Milikowsky, Founder of Milikowsky Tax Law, breaks down three essential actions to take right away if you find yourself facing an audit.

Read on to learn more.

Identify Key Audit Details

The first thing you should do is gather as much information as possible about the audit. Look closely at the letter to identify the following:

  • The Revenue Agent’s Information: The IRS auditor’s name, phone number, and fax number should be included in the letter. This is your primary point of contact during the audit.
  • Location: Check if the auditor is located in your city or outside of it. If they are out of state, it could complicate the process, requiring additional steps and understanding.
  • Addressed To: Is the audit directed at you, your spouse, or your business? This is a crucial detail, especially if it’s a business audit, as it may lead to an audit of your personal tax returns as well.
  • Audit Years: The IRS typically audits up to three years of your tax returns. However, they may start with one year and expand the audit to other years later.

Review the Preliminary Issues

At the bottom of the audit letter, you’ll find a list of the issues the IRS wants to review. It’s important to note that this is not a complete list—it’s just a starting point. The IRS might expand their review to other areas based on their findings. Some common areas they’ll scrutinize include:

  • Bank Statements: The IRS will conduct a “bank deposit analysis” to check whether your reported income matches the deposits in your bank account. If they find discrepancies, they will assess additional taxes, penalties, and interest.
  • Independent Contractors: If you made payments to independent contractors, the IRS will verify whether you issued the proper 1099 forms. Failure to do so may result in disallowing deductions or even a 27% backup withholding tax.

Be Honest and Seek Professional Help

While it’s important to be honest during the audit, you don’t have to volunteer more information than necessary. The IRS will ask detailed questions, and anything that appears inconsistent or incomplete can lead to further scrutiny. It’s also vital that you avoid any attempts to “manufacture” documentation during the audit, as this could be considered fraudulent.

How a Tax Attorney Can Help

Given the complexities of an IRS audit, it’s strongly recommended to hire a tax attorney. A tax attorney can help:

  • Review your financials and tax returns.
  • Address potential issues early, helping to resolve them more efficiently.
  • Guide you through the IRS interview process. The IRS may interview you and your spouse (if applicable), asking a series of questions to assess whether the errors on your return were intentional or accidental.
  • Protect any communication with your attorney, which remains confidential, unlike communication with your CPA.

A tax attorney can also help you develop a strategy for the audit, ensuring that you present accurate, truthful information while protecting your interests.

What to Expect During an IRS Audit Interview

As part of the audit process, the IRS will likely conduct an interview with the taxpayer or a business representative (such as a corporate officer). The auditor will ask questions about your background, education, and the mistakes on the return. They may even inquire about any communication you had with your CPA. Keep in mind that conversations with your CPA are not protected, but discussions with your attorney are.

Be Transparent, but Avoid Over-Explaining

When answering questions, make sure your responses align with the documents you’ve submitted. Inconsistencies or unclear explanations could lead the IRS to dig deeper into your financials, potentially lengthening the audit process.

If there are legitimate errors on your return, be prepared to explain them. However, do not attempt to provide explanations that are not backed by documentation. And most importantly, never attempt to create or backdate documents to cover mistakes.

Final Notes

The IRS audit process can be complex and time-consuming, but being proactive is the key to resolving it smoothly. If you’ve received an audit notice, gather all the necessary information, be honest and transparent, and work with a tax attorney to ensure you’re in the best position to handle the situation effectively.

At Milikowsky Tax Law, we specialize in helping clients navigate IRS audits, providing the support and expertise you need to resolve issues quickly and efficiently. If you’re facing an IRS audit, contact us today for professional guidance.