What Happens to Your Tax Refund During an IRS Audit

You can still receive your refund while under audit, but the IRS may delay it or hold part of it

An IRS audit does not automatically stop your refund. The IRS will process your return and issue any refund you are owed, but the timing and amount depend on what the audit covers. If the audit involves the items you claimed as deductions or credits that led to your refund, the IRS may hold the money while they investigate. If the audit covers unrelated income or expenses, your refund typically processes on schedule.

The key factor is whether the audit touches the specific line items that created your refund. For example, if you claimed a large home office deduction and your refund came from that deduction, an audit of the home office claim could delay or reduce your refund. But if you are being audited about charitable donations and your refund came from child tax credits, the refund usually moves forward.

Key Takeaways

The IRS does not automatically withhold refunds during an audit; they process the return and hold money only if the audit directly affects the refund amount.
A correspondence audit (conducted by mail) typically takes two to four months, while an office audit can take several months longer.
If you owe money after the audit, the IRS will use your refund to pay what you owe before sending you the remainder.
You can request an installment plan or ask about payment options if the audit results in a tax bill you cannot pay in full.

How the IRS handles refunds during different audit types

The IRS conducts three main types of audits, and each one affects your refund differently. A correspondence audit happens entirely by mail — the IRS sends you a letter asking for documents to support specific claims on your return. These are the most common and usually the fastest. The IRS typically makes a decision within two to four months. During this time, your refund sits in a holding pattern. Once you respond with documents and the IRS reviews them, they either approve your return as filed (and send your refund) or adjust it (which may reduce or eliminate your refund).

An office audit requires you to visit an IRS office in person with your records. These take longer — often four to six months or more — because the IRS schedules appointments and reviews your documents face-to-face. Your refund is held during the entire process. An field audit is the most intensive; an IRS agent visits your home or business. These can stretch over many months. In all three cases, the IRS does not send your refund until the audit concludes.

When the IRS will reduce or eliminate your refund

If the audit finds that you overclaimed deductions, credits, or income, the IRS adjusts your tax liability. This means you may owe money instead of receiving a refund. The IRS will use any refund you were expecting to pay down what you now owe. For example, if your original return showed a $2,000 refund but the audit determines you owe $1,500 in additional tax, the IRS will send you $500. If the audit determines you owe $3,000, the IRS will use your $2,000 refund toward that bill and you will owe an additional $1,000.

The IRS also charges interest and penalties on unpaid taxes from the original due date. Interest accrues daily at a rate set quarterly by the IRS (it varies). Penalties depend on the type of error — accuracy-related penalties are typically 20 percent of the underpayment, while failure-to-pay penalties are 0.5 percent per month. These amounts are added to what you owe.

What to do if you cannot pay what the audit determines you owe

If the audit results in a bill you cannot pay when ready, you have options. You can request a short-term extension (up to 180 days) to pay in full without setting up a formal plan. You can also set up an installment agreement, which lets you pay the bill in monthly payments. The IRS charges a setup fee (typically $31 to $225 depending on the payment method) and interest continues to accrue on the unpaid balance.

Another option is to request Currently Not Collectible status, which temporarily pauses collection efforts if you are facing financial hardship. Interest and penalties still accrue, but you are not required to make payments while your case is in this status. The IRS can reopen collection later when your financial situation improves. To explore these options, contact the IRS at the phone number on your audit notice, or work with a tax professional or Low Income Taxpayer Clinic (LITC), which offers free representation to people below certain income thresholds.

How to respond to an audit notice and protect your refund

When you receive an audit notice, the letter will specify which items the IRS is questioning and what documents they want to see. Respond by the important date stated in the letter — typically 30 days for a correspondence audit. Gather the documents that support your claims: receipts, invoices, bank statements, cancelled checks, or mileage logs, depending on what you claimed.

Send copies, not originals, and keep a copy for your records. If you cannot find a document, send a written explanation of why it is unavailable and provide any substitute evidence (a credit card statement, a bank record, a contemporaneous note). The IRS understands that some records are lost or destroyed. If you miss the important date, contact the IRS when ready — you may be able to request an extension, though the IRS is not required to grant one.

Whether you should hire a representative for an audit

You can represent yourself in an audit, and many people do for straightforward correspondence audits. However, if the audit is complex, involves large amounts of money, or you are uncomfortable dealing with the IRS, hiring a representative can protect your interests. A Certified Public Accountant (CPA), Enrolled Agent (EA), or tax attorney can attend the audit on your behalf, negotiate with the IRS, and help you understand the findings.

If you cannot afford a paid representative, contact your local Low Income Taxpayer Clinic. These clinics are funded by the IRS and provide free or low-cost representation to people with incomes below a certain threshold (which varies by clinic). You can find a clinic near you through the IRS website. A representative does not change the audit outcome, but they can may support your position is clearly presented and help you understand your rights.

What happens after the audit concludes

When the audit is complete, the IRS sends you a formal notice called a Notice of Examination Results (or similar, depending on the audit type). This letter explains what the IRS found, what adjustments they made, and what you owe or will receive. If you agree with the findings, you sign the notice and return it. If you disagree, the letter will explain your appeal rights — you have the right to appeal to the IRS Office of Appeals within 30 days.

Once the audit is closed and you have either agreed to the findings or exhausted your appeal rights, the IRS processes any refund or collects any balance due. If you owe money, you can set up a payment plan at that time if you have not already done so. If you are receiving a refund, the IRS will issue it by check or direct deposit, depending on how you filed your return.

Frequently Asked Questions

Can the IRS audit me after I receive my refund?

Yes. The IRS can audit a return up to three years after you file it (or longer if they suspect substantial underreporting of income). If they audit you after you have received your refund, they can demand repayment if they find you owe additional tax. This is why keeping records for at least three years is important.

Does being audited affect future refunds?

An audit itself does not affect your may be able to access for future refunds. However, if the audit results in penalties or if you have unpaid tax debt, the IRS may offset future refunds to pay down what you owe. This is called a refund offset or tax offset.

What if I disagree with the audit results?

You have the right to appeal. The audit notice will explain how to request an appeal to the IRS Office of Appeals within 30 days. You can also dispute the findings in Tax Court if you prefer. An appeal does not may provide a different outcome, but it gives you a chance to present additional evidence or arguments.

How long does an audit typically take?

A correspondence audit usually takes two to four months. An office audit typically takes four to six months or longer. A field audit can take many months. The timeline depends on how quickly you respond to requests and how complex the issues are.

Will I lose my refund if I made an honest mistake on my return?

An honest mistake does not result in penalties, but you may still owe additional tax if you underpaid. The IRS will adjust your return based on what they find. If you owe more than your refund, you will have a bill. If your refund was larger than what you owe, you will receive the difference.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.