Top Ten Tips for Surviving an Audit

Convince the IRS you were entitled to the credits, deductions, and exemptions you took.

If you're facing a tax audit, here are the top ten tips for dealing with the IRS.

  1. What you'll need to do. In a tax audit, you must convince the IRS that you reported all of your income and were entitled to any credits, deductions, and exemptions that are questioned.
  2. Delay when possible. 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.
  3. Don't host the IRS. Keep the IRS from holding the audit at your business or home. Instead, go to the IRS or have your tax pro handle it. Field audits (at your place) are used mainly when there is business income; consult a tax professional before hosting a field audit.
  4. Prepare your records. If you are missing receipts or other documents, you are allowed to reconstruct records.
  5. Manage your expectations. Don't expect to come out of the audit without owing something—the odds are against you. Don't try to compromise on the amount of taxes to be paid; instead, negotiate the tax issues with the auditor.
  6. Don't answer unless asked. Give the auditor no more information than they're entitled to, and don't talk any more during the audit than is absolutely necessary. Don't give copies of other years' tax returns to the auditor. In fact, 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.
  7. Read up. Research tax legal issues by using free IRS publications and commercial tax guides. If you're still unclear about the tax law or how to present your documents to an auditor, consult a tax pro before the audit.
  8. Know your rights. Browse IRS Publication 1, explaining the Taxpayers' Bill of Rights, before your audit. If the audit isn't going well, demand a recess to consult a tax pro. Ask to speak to the auditor's manager if you think the auditor is treating you unfairly. If the subject of tax fraud comes up during an audit, don't try to handle it yourself.
  9. Time is on your side. 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.
  10. Appeal the results. When you get the examination report, call the auditor if you don't understand or agree with it. Meet with the auditor's manager to see if you can reach a compromise. If you can't live with an audit result, you may appeal within the IRS or go on to tax court.

For detailed information about IRS tax audits, see Stand Up to the IRS by Frederick W. Daily and Stephen Fishman (Nolo).

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