If you’ve received an audit notice from the IRS or state, the most important thing you can do right now is get the right help before you respond. Yarborough & Potter represents individuals and businesses through every stage of the audit process, with a team that includes former IRS agents who know exactly how these cases are handled from the inside.
The first thing to know is that an audit notice is not a criminal accusation. It means the IRS or state has selected your return for review and wants to verify specific items. It may be as simple as confirming a deduction, or it could involve a broader examination of your income and expenses. Either way, how you respond in the early stages has a significant impact on the outcome.
The most common mistake people make is responding on their own before understanding what’s actually being asked. Some people provide too much information. Others provide too little. Some contact the auditor directly and say things that complicate the case. All of these missteps can be avoided with the right guidance upfront.
Before you respond to the notice, before you call the auditor, and before you start pulling documents together, talk to a professional who understands the audit process. That single step can change the trajectory of your entire case.
The IRS conducts several types of audits, and the type you’re facing determines how the process works, what’s at stake, and how to prepare.
This is the most common type. The IRS sends a letter asking you to verify or explain specific items on your return, usually a particular deduction, credit, or income amount. You respond by mail with documentation. These are narrower in scope, but they still need to be handled carefully. Sending the wrong documents or an incomplete response can lead to adjustments you didn’t need to accept.
The IRS asks you to bring records to a local IRS office for an in-person meeting with an examiner. These are more involved than correspondence audits and typically cover multiple areas of your return. Having professional representation at this meeting makes a real difference in how the conversation goes and what the examiner walks away with.
This is the most comprehensive type. An IRS Revenue Agent visits your home or place of business to conduct a detailed review of your return, your records, and in some cases your overall financial situation. Field audits are more common for business returns and higher-income individuals, and they tend to be the most consequential. How you manage a field audit from the start, what you provide, what you don’t, and how you interact with the agent, all matter.
The North Carolina Department of Revenue and the South Carolina Department of Revenue also conduct audits independently of the IRS. These follow their own processes and timelines, and they sometimes happen in coordination with a federal audit. We represent clients through state audits as well.
Audits are not always random. Certain characteristics on a return are more likely to attract IRS attention. Understanding what may have triggered the audit can help shape an effective response.
Audits are not always random. Certain characteristics on a return are more likely to attract IRS attention. Understanding what may have triggered the audit can help shape an effective response.
The home office deduction is legitimate, but it’s also one of the most frequently questioned items on a return. Documentation and proper calculation are critical.
Charitable deductions that are unusually high for your income bracket may be flagged for review, particularly if supporting documentation is thin.
If the IRS receives a 1099 or W-2 that doesn’t match what’s on your return, it will almost certainly follow up. Third-party reporting mismatches are one of the most common triggers.
Businesses that deal in significant amounts of cash receive more scrutiny because there are fewer built-in reporting checks on revenue.
If your business reports losses year after year, the IRS may question whether the activity qualifies as a business or whether it’s being treated as a hobby.
Returns filled with round numbers suggest the figures are estimated rather than drawn from actual records. This signals weak documentation.
Being selected for an audit doesn’t mean you did anything wrong. It means the IRS wants to verify what’s on your return, and the burden is on you to support it.
People come to us at different points in the audit process, and how we help depends on where things stand.
The IRS or state sends a letter identifying your return, the tax year under review, and the specific items being examined. The notice will include a deadline for your response. Read it carefully, but do not respond until you’ve spoken with a professional.
We analyze the return that’s been selected, identify the areas being questioned, and pull your IRS transcripts to understand the full picture. This tells us what the IRS already knows and what they’re specifically looking for.
We work with you to assemble the records that support the positions on your return. This includes receipts, bank statements, contracts, mileage logs, and any other relevant documentation. We present only what’s needed to address the specific items in question.
For correspondence audits, we prepare and submit the written response. For office and field audits, we attend the examination as your representative. As Enrolled Agents, we have full authority to represent you before the IRS without you needing to be present.
After reviewing the response and documentation, the examiner either closes the audit with no changes or proposes adjustments. If adjustments are proposed, we review them in detail and advise you on whether to accept, negotiate, or challenge the findings.
If the proposed adjustments are inaccurate or unfair, you have the right to appeal. The IRS Appeals Office is independent from the examination division, and in many cases, a well-prepared appeal can result in a significantly better outcome. Our team has direct experience with the appeals process, including Gerald Yarborough’s background in the IRS Appeals Office itself.
Most tax professionals learn about audits from textbooks and continuing education courses. Our team learned by conducting them.
Gerald Yarborough began his career as an IRS Revenue Agent, conducting the same types of examinations we now defend clients against. David Yarborough served as an IRS Revenue Officer in Charlotte. That combined experience gives our team a perspective that very few firms can match. We know how examiners think, what they prioritize, and how they build their cases.
Gerald Yarborough also worked in the IRS Appeals Office in Dallas, which is the division that reviews disputed audit findings. That means we understand both how audits are conducted and how they’re challenged.
As Enrolled Agents, David Yarborough and Melissa Potter are federally authorized to represent any taxpayer before any division of the IRS. You don’t need an attorney for most audit situations, and in many cases, an Enrolled Agent with direct IRS experience is a better fit.
We’ve represented individuals, sole proprietors, LLCs, and corporations through correspondence audits, office audits, field audits, and appeals. We’ve seen the process from every angle.
Get help first. Even if the notice looks simple, how you respond sets the tone for the entire audit. Providing too much information, volunteering details the examiner didn’t ask for, or submitting disorganized records can all make the situation worse. At minimum, have a professional review the notice and advise you on what to do before you send anything.
Yes. We regularly represent clients whose returns were prepared by other firms or by the taxpayer themselves. We’ll review the return, evaluate the positions taken, and build the strongest response possible based on the available documentation.
Missing documentation is common, but it doesn’t mean you automatically lose. There are ways to reconstruct records, obtain duplicate statements from banks and financial institutions, and present alternative evidence to support your positions. We help clients work through this regularly.
A CP2000 is not technically an audit. It’s an automated notice that flags a mismatch between what’s on your return and what was reported to the IRS by third parties (employers, banks, brokerages). It proposes changes and additional tax based on that mismatch. These still require a careful response, and we handle them the same way we handle audit notices.
Generally, the IRS can audit returns filed within the last three years. That window extends to six years if there’s a substantial understatement of income (typically 25% or more). There is no statute of limitations for fraud or for returns that were never filed.
If the audit produces a balance you can’t pay in full, you have options. Installment agreements, currently not collectible status, and in some cases offer in compromise programs are all available depending on your financial situation. We can help with the resolution side as well.
An audit doesn’t protect you from being audited again, but it also doesn’t increase your chances. If the same characteristics that triggered the first audit are still present on future returns, there’s a possibility of being selected again. We can help you adjust your recordkeeping and documentation practices to reduce that risk.
Yes. We represent clients through audits conducted by the North Carolina Department of Revenue and the South Carolina Department of Revenue, either independently or in coordination with a federal audit.
An audit notice feels urgent, and it is. But it’s also manageable when you have the right people in your corner. Whether you just received a notice, you’re in the middle of an examination, or you’ve gotten a report you don’t agree with, we can help.
The consultation is free. Bring us the notice, and we’ll tell you exactly what you’re dealing with and what needs to happen next.
Yarborough & Potter Inc. is eager to answer your queries about our tax services. You can begin your relationship with us today by contacting us using the form below.
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