The IRS opened an examination of your return. Here's what to do next.
Under IRC §7602, the IRS has broad authority to examine your books, records, and testimony to ascertain the correctness of any return. That authority is bounded by procedural protections — the Powell standards, the §7491 burden-shifting framework, and the §7602(c) third-party contact notice requirement. The audit outcome turns on the substantiation you present and the procedural posture you maintain. We represent you under Form 2848 Power of Attorney from the first response forward.
Ebot Mbi, CPA, EA · Texas CPA #127163 · IRS Enrolled Agent, federally licensed by the U.S. Department of the Treasury to practice before the IRS · base fee $650 · free notice review.
Authority
IRC §7602 · IRC §7491 · IRM 4.10 · IRM 4.13
Forms Filed
Form 2848 · Form 4549 · Form 12203 · Form 870
Outcome Targeted
No-change · agreed adjustment · Appeals protest · reconsideration
Do not contact the IRS directly before you have representation.
Once you file Form 2848 (Power of Attorney), all IRS communications must go through your representative. Direct taxpayer-to-examiner conversation — even seemingly harmless small talk — creates statements that can be cited against you. The examiner is gathering facts under IRC §7602(a) examination authority. Every word matters.
Audit types — distinguishing what's in your envelope
Not all audits are the same. Identify the type before responding.
Correspondence Audit
Triggered by: Letter 566 / CP2000
Unit: Centralized correspondence unit
Handled entirely by mail. Examiner is in a centralized unit; you respond with documentary substantiation. Typically focuses on one or two specific items — a deduction, income reporting discrepancy, or credit. Usually the lowest-stakes audit type, but still requires careful documentation strategy.
Office Audit
Triggered by: Letter 915
Unit: Tax Auditor — local IRS office
Requires appearance at an IRS office for an interview with a Tax Auditor. Covers multiple issues on less complex returns. The auditor issues an Information Document Request (IDR) before the interview specifying documents to bring. Failure to produce IDR-requested documents shifts strategic posture significantly.
Field Examination
Triggered by: Letter 525 + Form 4564 IDR
Unit: Revenue Agent — your office or representative's office
Conducted by a Revenue Agent in-person. The most procedurally intensive examination type. The Revenue Agent has broader authority under IRC §7602 to summons records and witnesses, may conduct multiple in-person sessions, and typically examines complex returns with multiple business issues.
IRC §7602 — the examination authority framework
Broad authority. Bounded by procedural protections.
IRC §7602(a) authorizes the Secretary "for the purpose of ascertaining the correctness of any return... to examine any books, papers, records, or other data which may be relevant or material to such inquiry" and "to summon" the taxpayer or third parties to produce records. The Supreme Court's standard for summons enforcement comes from United States v. Powell, 379 U.S. 48 (1964): the IRS must show a legitimate purpose, relevance, non-possession of the information, and compliance with administrative steps. The taxpayer may challenge enforcement by demonstrating any Powell prong is unmet, by asserting privilege, or by showing improper purpose.
IRC §7602(c), as amended by the Taxpayer First Act of 2019 (Pub. L. 116-25, §1206), imposes a critical procedural protection: the IRS must give the taxpayer 45 days advance notice via Letter 3164 before contacting third parties — banks, customers, employers, vendors. This 45-day window is the taxpayer's opportunity to provide the information directly and prevent third-party contact that can harm business relationships.
IRC §7602(d) prohibits summons issuance after a Department of Justice referral for criminal prosecution. Once the IRS has referred the matter to DOJ, the civil summons authority is suspended — civil examination cannot be used to circumvent constitutional protections in parallel criminal proceedings. Practitioners should always check whether a DOJ referral has occurred at engagement.
IRC §7491 — burden-shifting analysis
The taxpayer bears the initial burden. Until §7491 shifts it.
The default rule under Tax Court Rule 142(a) is that the taxpayer bears the burden of proof. The IRS's determinations are presumptively correct. IRC §6001 and Treas. Reg. §1.6001-1 require taxpayers to maintain books and records substantiating income, deductions, and credits.
IRC §7491(a), enacted in RRA 1998, shifts the burden of proof to the IRS in court proceedings when all four conditions are met. Cooperation during the examination — the fourth prong — is the most procedurally consequential. Taxpayers who frustrate the examination lose §7491 at trial.
All four conditions required for §7491 burden shift
Credible evidence
Taxpayer introduces credible evidence on the factual issue
Substantiation
Complied with all IRC substantiation requirements including §274(d)
Recordkeeping
Maintained all records required under IRC §6001
Cooperation
Cooperated with all reasonable IRS requests for witnesses, information, and documents
The Cohan framework — estimation authority
When you cannot prove the exact amount.
Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930) — Judge Learned Hand
"Absolute certainty in such matters is usually impossible and is not necessary; the Board should make as close an approximation as it can, bearing heavily, if it chooses, upon the taxpayer whose inexactitude is of his own making."
The Cohan rule remains current law — reaffirmed in Villa v. Commissioner, T.C. Memo. 2023-155, and Alvarado v. Commissioner, T.C. Memo. 2024-1. The rule allows estimation of deductible expense amounts where the taxpayer establishes that the expense was incurred but cannot document the exact amount.
Critical Limitation 1
The taxpayer must establish that the expense was actually incurred. Cohan allows estimation of amount — not estimation of existence.
Critical Limitation 2 — IRC §274(d) override
Travel, meals, entertainment, business gifts, and 'listed property' (vehicles, computers, cell phones) require strict substantiation under IRC §274(d). The Cohan rule cannot be invoked for these categories.
Critical Limitation 3
The court has discretion, not obligation, to apply the rule. Courts 'bear heavily' upon taxpayers with poor records — estimated amounts typically skew toward the lower bound.
When the audit is over but the result was wrong — IRM 4.13
Audit reconsideration under IRM 4.13.
If you missed the 30-day window to respond to Letter 525 or failed to timely petition Tax Court after a Notice of Deficiency, the assessment becomes final — but is not necessarily permanent. IRM 4.13 (Audit Reconsideration) provides a procedural path to reopen a closed audit. To qualify: (1) have new information not previously considered; (2) evidence the original determination was incorrect; (3) unpaid tax remaining on the assessment.
The request is submitted in writing to the address on the most recent IRS notice, along with new evidence and supporting documentation. Audit reconsideration is not a statutory right — it is discretionary. Where the IRS denies reconsideration, alternative paths include doubt-as-to-liability OIC under IRC §7122 using Form 656-L.
Transparent pricing — audit engagements
Scope-priced engagement based on audit complexity.
| Service | Fee |
|---|---|
| Base resolution scoping + transcript pull | $650 |
| Correspondence audit (1-2 issues) | $1,500 – $3,000 |
| Office audit (multiple issues) | $2,500 – $5,000 |
| Field examination (Revenue Agent, complex return) | $4,000 – $10,000+ |
| 30-day letter protest + Appeals representation | $3,000 – $7,500 |
| Audit reconsideration under IRM 4.13 | $2,500 – $5,000 |
| Doubt-as-to-liability OIC (post-audit) | $3,500 – $6,000 |
| Tax Court petition under IRC §6213(a) | $5,000+ (separate engagement) |
| Cohan-rule substantiation reconstruction | Included in scope |
The engagement letter is the controlling document; no specific outcome or timeline is guaranteed. Audit outcomes depend on substantiation, applicable law, and IRS examination procedures. Texas CPAs are bound by the rules of the Texas State Board of Public Accountancy.
Common questions about IRS audits
A Texas CPA. A federally licensed IRS Enrolled Agent.
IRS audit representation requires the credential authority to communicate with the examiner on equal procedural footing. Ebot Mbi holds a Texas CPA license #127163 issued by the Texas State Board of Public Accountancy, and an IRS Enrolled Agent license federally issued by the U.S. Department of the Treasury — the highest tax-representation credential the federal government awards. Under IRS Circular 230, Enrolled Agents are one of three categories authorized to represent taxpayers in any administrative matter before the IRS.
What comes after the audit — downstream pages
Audit notice in hand right now?
Send the IRS letter. We review it the same business day, identify the audit type, scope the engagement, and respond on your behalf under Form 2848 once the engagement letter is signed.
Email Audit Letter →Studying examinations for your EA exam?
The full practitioner walkthrough — IRC §7602 examination authority, the Powell summons framework, IRC §7491 burden-shifting, the Cohan doctrine and its IRC §274(d) limits, audit reconsideration under IRM 4.13, and Bluebook citation index — is on the practitioner page.
Read the practitioner pageLast updated: September 7, 2026
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