IRS audits in Midland

Why Midland returns get questions

Income here is high and uneven. In Q1 2026 Midland County jobs averaged $2,024 a week, oil and gas extraction $6,490, and mining support activities $2,409 ^[1]. Large swings from year to year, per diem, mileage, equipment purchases and 1099 contract income are the items the IRS most often asks about ^[2].

Royalty and working-interest owners receive income reported by operators. The Railroad Commission regulates oil and gas operators in Texas ^[3]; if the IRS matching system shows royalties you did not report, expect a letter.

Types of audits

Most audits are by mail: the IRS asks for documents to support specific items. Office audits take place at an IRS office, and field audits at your home or business. The IRS audit page explains each type and how you are contacted; the IRS does not start an audit with a phone call or email ^[2].

Respond by the deadline on the letter. If you need more time, ask before the deadline; missing it can lead to an assessment without your records being considered.

Your right to a representative

You can authorize a CPA, enrolled agent or attorney with Form 2848. Under 26 U.S.C. § 7521(c) the IRS generally cannot require you to attend an interview in person once a qualified representative is authorized, unless it issues an administrative summons ^[4].

If you disagree with the findings, you can ask for a conference with the Independent Office of Appeals, which is separate from the examiner ^[5]. Low-income taxpayers can get free or low-cost representation from a Low Income Taxpayer Clinic ^[6].

Records to gather

Pull your wage and income transcript for the year under audit ^[7]. Gather bank statements, settlement statements from operators, mileage logs, receipts for equipment and tools, and any per diem records from employers.

If you are self-employed, separate business and personal spending in your records before the meeting. Reconstructing records from bank statements is normal when receipts are missing.

Answer only what the letter asks. Send copies, never originals, and keep a list of what you sent and when. If the examiner asks for something you do not have, say so and offer the best substitute, such as a bank statement or a letter from the payer.

How long the IRS has

The IRS generally has three years from the date you filed to assess additional tax, longer if income was substantially understated or a return was never filed. Examiners sometimes ask you to sign an extension of that period; you can ask what the extension covers and how long it lasts before you sign.

If you did not file for a year, an audit can be replaced by a substitute return prepared by the IRS. Filing your own return first is almost always better ^[8].

Keep a copy of the final examination report and the letter that explains your appeal rights. Those two documents set the deadlines for everything that follows.

After the audit

If an audit ends with tax due, the balance moves to collection. Payment plans, hardship status and offers all use county expense standards: in Midland County $2,263 a month for housing for one person, in Ector County $1,950 ^[9]. Penalties from the audit can sometimes be reduced for reasonable cause ^[10].

Texas has no individual income tax ^[11], so an IRS audit does not trigger a state income-tax audit. Businesses can still face separate Texas Comptroller audits for sales or franchise tax ^[12].

If you have an audit letter, call. The first call is free, and you get a real professional instead of a national call center.