Figures: tax year 2026
An examination is the Internal Revenue Service (IRS) review of records and return positions to determine the correct tax liability. The initiating notice and requested action explain the audit process more accurately than whether the contact arrives by mail.
The IRS selects returns through statistical screening, random research samples, related examinations, and information suggesting noncompliance. Selection does not establish an error, and an examination can support either additional tax or a refund.
A mailed request supporting a deduction may initiate a correspondence examination. A mailed proposal reconciling employer-reported income may instead involve information matching; location alone cannot identify the procedure.
NOTE: Re-examination limits and the effect of prior audit findings on later corporate tax years are outside this lesson's scope.
The examiner explains proposed adjustments and their tax effects in an examination report. The taxpayer may submit additional information or discuss disputed findings with the examiner and the examiner's manager before requesting administrative review.
Exhibit one. Illustrative FreeFellow proposed-adjustment excerpt.
Common mistakes
- Receipt restarts the deadline. A July 8 receipt does not replace a July 2 deficiency-notice mailing date.
- Appeals files the court case. A protest delivered to Appeals does not place a petition on the Tax Court docket.
- Trial forums form a ladder. District court is not the appellate destination for a Tax Court loss.
Bottom line
- Examination can end with no change, agreement, or disagreement; the thirty-day letter generally provides an opportunity to request administrative Appeals consideration.
- Ordinary deficiency petitions are due 90 days after mailing, or 150 days when the notice is addressed to a person outside the United States, with applicable statutory timing adjustments.
- Tax Court offers prepayment deficiency review without a jury; ordinary refund litigation generally requires full payment and an administrative claim, with a possible jury only in district court.
- Small income-tax cases require election and court concurrence, permit disputes up to $50,000 per year, and produce decisions without appellate review or precedential effect.
Exam shortcut
Identify the document before counting days. Mark whether it concerns proposed changes, a deficiency, refund disallowance, a collection determination, or a partnership adjustment. Write the triggering event beside each clock: mailing, filing, payment, or assessment. Cross out receipt dates that do not control the question. For court choice, test payment ability and completed refund prerequisites before considering a jury or appellate destination.
The full lesson (about 7,197 words, 48 min read) adds 3 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- I.C1
Browse all free CPA REG lessons or jump into free CPA REG practice questions.