Latest / VoraPrep Audio — Professional Licensure & Certification Exam Prep / [EA] SEE3: Mastering IRS Office and Field Examinations
Transcript
- Hey, welcome to VoraPrep Audio. Sooner or later, it’s going to happen. You'll get a call. Your new client’s voice will be shaking. They'll say, "I got a letter from the IRS" It might be a Letter 2205-A, the one that kicks off a field audit. In their head, they're picturing agents in dark suits storming their office. Seizing everything. It's pure panic. And that's the moment where you, as an Enrolled Agent, earn your fee. Your job is to turn that panic into a calm, controlled process. Because an audit isn't a crisis. It's a procedure. And if you know the steps, you can lead your client through it with confidence. Think of yourself as the director of a play. The IRS agent has a role. Your client has a role—and that role is mostly to stay off-stage. You are in charge of the script, the setting, and the information that gets shared. You control the narrative. So, when that audit notice shows up, there's a five-step framework that you should immediately click into. It works for pretty much any audit question you'll see on the exam, and it definitely works in real life. First thing you do, always, is identify the venue and secure your authority. Is this a correspondence audit done by mail? An office audit where you go to them? Or a field audit where they want to come to you? Whatever it is, you can't do anything until you have a signed Form 2848, the Power of Attorney. Get it for the specific tax form and year they're looking at. Without that piece of paper, the IRS won't even talk to you. It’s your ticket to the game. Once you have that, you take control of the calendar and the location. The IRS will propose a date. You never, ever have to accept it. You have the right to ask for a reasonable postponement. You need time to prepare, and that’s perfectly normal. And if it's a field audit, do not let them come to the client's business. That’s a classic mistake. It's disruptive, employees get nervous, and the agent can see things or overhear conversations that are none of their business. You always offer your office instead. Always. You want the meeting on your turf, not theirs. Okay, next, when they send an Information Document Request—an IDR.—your job is to respond very narrowly. This is where people get into trouble by being too "helpful." If they ask for the 2025 bank statements, you give them the 2025 bank statements. You don't give them 2024 or 2026. You don't add in the credit card statements because you think it helps tell the story. You provide only what was asked for, for the period under audit. Anything extra is an invitation for them to start digging somewhere else. It's called scope creep, and you're the gatekeeper preventing it. This leads right into the next step: knowing who does what. The client’s role is to give you information. Your role is to give that information to the IRS. The client should never, ever attend an office or field audit. You are the filter. You’re the single point of contact. This prevents them from getting nervous and saying something they shouldn't. An agent might casually ask, "How was business last year?" and your client might say, "Great! Especially that big cash job we did." And boom, the audit just took a very bad turn. You are there to stick to the documented facts. Finally, you need to know how the game ends. What are the procedural endpoints? If you and the agent agree on the changes, you can sign a Form 870 to close the case. But if you don't agree, the process moves up the ladder. You'll get what's called a 30-day letter. This is your chance to file a protest and go to the IRS. Appeals office. If you still can't agree there, the IRS issues a 90-day letter. That’s the big one. It's also called a Statutory Notice of Deficiency, and it’s your client's ticket to petition the U.S. Tax Court. Missing that 90-day deadline is catastrophic. It’s like missing a statute of limitations. The client loses their right to argue their case in court before paying. So that’s the framework. But the real victory in an audit is often decided before you even meet the examiner. Your pre-audit prep is everything. After you file that Form 2848, you need to dissect the IRS notice. What years are they looking at? What are the specific issues? That's the battlefield. Then, you conduct a detailed interview with your client. They know the story behind the numbers. Why was this expense so high? What was the business purpose for that trip? You need to find the weak spots before the agent does. A smart move is to also pull the tax returns for the year before and the year after the audit period. Agents love to look for patterns or big inconsistencies from one year to the next. You want to see what they're going to see. Then, you basically conduct a mock audit yourself. Go through the return line by line. Ask your client for the exact same documents you expect the IRS to request. It’s a dress rehearsal. And when you gather all those documents—the bank statements, receipts, invoices—you make high-quality copies. Never, ever give the IRS original documents. Originals can get lost, and then your proof is gone forever. You control the evidence, so you keep the originals. Now, let's talk about the actual audit. If it’s an office audit, you’re going to them. The key here is to keep it contained. You show up with your Form 2848, but without your client. You bring only the specific documents that were requested in the letter. If the agent asks for something you don't have, the right answer is a calm, "I don't have that with me today, but I can get it for you." It shows you're cooperative, but it also gives you time to review that document before handing it over. Field audits are a bit more intense because they are coming to you—or, preferably, your office. You need to set up a command post. Give the agent a conference room or a quiet office, away from everyone else. You act as the librarian. The agent doesn't get to wander over to the filing cabinets and browse. They request a specific file, you go get it, bring it to them, and then take it back when they're done. And you keep a log of everything. Every question asked, every document you provide, every person the agent talks to. That log is your audit bible. Let's walk through a quick example. An agent is auditing your client, a plumber who files a Schedule C. The agent issues an IDR for the 2025 tax year. It asks for three things. First, all business bank statements for 2025. Second, invoices for all twenty-two thousand, five hundred dollars of 'Supplies' expenses. And third, a complete list of all customers, with their names and addresses. How do you respond? Well, you analyze the request. Items one and two—the bank statements and the supply invoices—are totally reasonable. They directly support numbers on the return. But item three, the complete customer list? That’s a fishing expedition. The agent doesn't need every customer's private information to verify the gross receipts. They can do that by looking at the bank deposits. So your strategy is to comply with the reasonable parts and push back on the overreach. You gather the bank statements and the supply receipts. Then you write a response letter. You state that you're providing complete documentation for items one and two. For item three, you politely state that a full customer list isn't required to verify gross receipts. But to be helpful, you offer an alternative. You can say something like, "Please identify any specific deposits you wish to trace, and we will provide the corresponding customer invoice." The wrong answer is to just hand everything over. It might feel cooperative, but it's actually a huge mistake. Answering that way is like a lawyer getting a subpoena and just handing over the entire file cabinet. Your job is to protect your client from overreach. You comply with the law, but you don't volunteer information that isn't required. There's a simple mnemonic to remember your conduct during an audit: PACED. P is for Professional. Always be courteous. It's not personal. A is for Answer. Answer only the question that was asked. Stop talking. Don’t elaborate. C is for Control. Control the environment, the client, and the flow of documents. E is for Escalate. If you and the agent hit a wall on a technical issue, it's okay to respectfully ask to speak with their manager. And D is for Document. Document every single interaction. If you remember PACED, you'll stay on the right track. Ultimately, on exam day, you're going to see questions that test your professional judgment. The right answer is almost always the one that protects the taxpayer's rights while following the rules. It’s about being a strategic advocate, not just a passive bookkeeper. Choose the answer that shows you're in control. So just remember the key steps. Your first move is always Form 2848. Control the meeting, control the documents, and keep your client away from the interview. You also need to know the difference between a 30-day letter and a 90-day letter. The 30-day letter gets you to Appeals. The 90-day letter is your ticket to Tax Court. Master that, and you'll be ready for any audit scenario they can throw at you. You've got this. Keep up the great work. VoraPrep is a full exam-prep app — lessons, practice questions, and an AI tutor in one place. Get started at Vora Prep dot com.