Preparing for an IRS Audit

When preparing for an IRS audit the key is to not be scared or act in haste. Read over all documents thoroughly, do some research and then begin to prepare. Familiarize yourself with what type of audit you are going through, what the IRS is requesting and why you filed the way you did. If you are unclear about anything, contact an accountant, attorney or anyone else who is registered to practice in tax court.

There are some common courses of action, which the average taxpayer is unaware of. First, you can tape record your audit meeting, but you have to notify the IRS within ten days of the tax audit meeting. Another item that you will want to educate yourself about is the ability to appeal the decisions, such as tax liens, tax levies and property seizures. Perhaps the IRS is lacking crucial information pertaining to your case, or maybe you are eligible for hardship relief.

While it isn’t necessary to appoint an accountant or registered agent, if you do enlist the help of a professional, you should give them “power of attorney”. This could be to your advantage because you wouldn’t be required to be at the meeting unless subpoenaed by the IRS. If this is the case, your registered agent can stall the process by needing to confer with you on some issues since you are not required to be present. This gives you the upper hand by giving you time to rebut the claim without being placed "on the spot".

Generally, the IRS tax audit notice will provide you with details on which part of the return is being questioned. Only provide that amount of information to the IRS. Do not volunteer or provide more documentation that what is being asked for. A simple measure, but one that many people overlook is making certain that the documentation is in the order of the request. For example, perhaps the IRS wants receipts for itemized deductions A, B and C, and they want copies of your bank statements for all of 2007. When preparing your file for your face-to-face audit, have copies, not originals, in the order of the request. Have on top the receipts for itemized deduction A, B and C labeled as such. Then follow that with copies of you bank statements from January through December in order. Paper clip those together with your request letter on the top. Appearing disorganized to an auditor will be to your detriment. The auditor will assume that your business is handled in an unorganized fashion and may feel that more mistakes may be found, which will result in higher tax penalties benefiting the IRS. The auditor may then extend the scope of the investigation. While many of the actions that you will take to combat the IRS audit, each are of high importance and can greatly affect the results. Take your time and be prepared.