Often it simply means that they have a question about an item on your tax return and would like you to clarify or send them documents or information that support the position you took on the return (this is commonly called a "letter audit"). Much more sinister is the "super audit", where you will have the pleasure of sitting with an IRS agent for however much time it takes him or her to crawl through every aspect of your financial life. Where you fall in between those probably depends on why the IRS is asking for information and what they are asking for. In any event, you should consult with an experienced tax attorney, CPA or enrolled agent before you discuss anything with the IRS. Seemingly insignificant matters and misstatements can come back to haunt you.
When the IRS wants to audit you that means it wants to check certain line items on your return and see if you have proof about the positions taken as to those line items. Example: you claim that you gave $100 to the Multiple Sclerosis Society. The IRS might ask to see a copy of the canceled check.
Many IRS audits are conducted by correspondence, so you may not need to "be there."
As always, this is a cost/benefit analysis. If your taxable income is $20,000, then you should handle the audit yourself. If your taxable income is $200,000, then you should retain a competent CPA to handle the audit.
