How to Survive an IRS Audit

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How to Survive an IRS Audit

If you are audited

Follow some basic guidelines to keep the audit civil and productive.

• Don’t ignore the IRS. Lack of cooperation can ultimately make things worse for you.
• Be organized. Have all your paperwork ready. Have all receipts and other items that will back up your deductions.
• Understand your rights as a taxpayer. You have the rights to privacy; confidentiality; courteous treatment; representation by another person; appeal if you disagree with the results of the audit; and the right to know why the IRS wants the information it does, how it will use it, and what will happen if you do not provide it.
• Be honest. Lies can cost you a lot more.
• Get professional representation (a tax lawyer, an enrolled agent, a certified public accountant). This can be helpful if the audit is being done in person and/or if the matter is complex. A representative can even go to an audit in your place, which can work in your favor.
• Provide copies of documents, but not the originals. You don’t want to lose any paperwork.
• Provide only the documents needed to support the deduction being questioned. Any other documents could result in some other deduction (or some of your income) questioned.
• Never provide more or less information than is requested. That means, don’t spend several minutes explaining yourself unless you are asked to. Don’t engage in casual conversation. IRS agents are trained to analyze that for information and can expand their audits to investigate it.
• Don’t argue or pick fights. Leave your philosophical or legal arguments against the income tax out of it. They won’t help. The IRS has heard all of them, and the federal government has ruled against them.
• Get copies of anything you sign. You may need these in case future problems arise.

If you disagree with the findings of the audit

If you agree with the findings of the audit, you will be asked to sign the examination report. If you owe money as a result, you can discuss your payment options.

But if you disagree with the findings, you can send a protest letter to the IRS within 30 days of getting the audit report. You can also request a conference with an appeals officer. If your appeal gets nowhere, you have the option of filing a petition in tax court.

There are other options as well: you can try mediation, arbitration, or, if you are a business or self-employed person, fast-track settlement. The IRS has more information about these options.

Around half of those who challenge audits are successful, meaning that they lower their tax bills to some extent.