Survive an Audit

by Bethany K. Laurence, J.D.

In an audit, you must convince the IRS that you reported all of your income and were entitled to all credits, deductions, and exemptions.

1. Delay the audit.
Postponing the audit usually works to your advantage. Request more time whenever you need it, to get your records in order or for any other reason. The IRS must complete an audit within three years of the time the tax return is filed, unless the IRS finds tax fraud or a significant underreporting of income.

2. Don't host the audit.
Keep the IRS from holding the audit at your business or home. Instead, go to the IRS or have your tax pro handle it. If you are asked to host an audit at your business premises, consult a tax pro.

3. Have realistic expectations.
Don't expect to come out of the audit without owing something -- the odds are against you. The average adjustment for an office audit (held at the IRS office) is $4,000; the average adjustment for a field audit is $17,000.

4. Be brief.
Give the auditor no more information than she is entitled to, and don't talk any more during the audit than is absolutely necessary. If you have something to hide, don't provide evidence to the auditor, but don't lie either. The adjustments she may make could be less damaging than if you had given her what she asked for. If in doubt, see a tax pro.

5. Don't offer other years' returns.
Don't give copies of other years' tax returns to the auditor -- if you do and she sees something she doesn't like she will make adjustments in those years too. Don't bring to an audit any documents that do not pertain to the year under audit or were not specifically requested by the audit notice.