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You just got a notice from IRS or state taxing authority inviting you for a “chat.” What do you do?

  • Scream like a banshee or,
  • Take an extended vacation to Europe or,
  • Read the rest of this post.

Hopefully, you picked choice (3).

1Don’t handle the audit yourself!! Consider hiring a professional such as a CPA, lawyer, enrolled agent or other tax professional. The key is to use a practitioner who is familiar with the ins and outs of tax audit procedures, who knows about penalty abatement alternatives, and can assist you with filing an appeal, if necessary, before the IRS Appeals office if you disagree with the auditor’s findings.

2Be prepared in advance. Understand that you and not the IRS has the burden of proof. Gather your records to be sure you can support each deduction that IRS is questioning. Try to reconstruct any missing documentation. If you need extra time, call IRS for an extension of time. 

3Always have your tax professional represent you without your being there if you can get away with that. Many times, IRS agents might ask for something in which the representative can say, I don’t know the answer, but if you need it, I can get it in the future, which in many cases can be forgotten by the agent. If you are there, you might say things that you shouldn’t say.

4If you are attending the audit, BE ON TIME. In fact, I would be early. One hour before the audit, IRS examiners review the tax return to see what the problems are. If you are late, you are giving them more time.

5NEVER volunteer information: one reason that I emphasized avoiding coming to the audit is that you should not be volunteering information. If you do attend the audit, answer any questions as succinctly as possible. Don’t elaborate. 

6If the auditor questions a deduction that you or your tax pro thinks is correct, always ask for the tax law reference. 

7Don’t be alone with a “Special Agent.” Special Agents are the criminal investigation arm of the IRS., If you ever get a Special Agent show up at your door ask them if they are investigating you. If so, only say three things:

  • Serve any documents that you need to serve,
  • Give me your business card and,
  • If no warrant, leave my house or business till I get a lawyer.

Special Agents are promoted based on indictments. Anything that you tell them can be used against you. If they catch you lying, they can indict you for that. If you do incur a criminal investigation, always get a lawyer who specializes in this. Don’t ever be alone with a criminal investigator without a lawyer. 

Following my tips will certainly make your life less taxing.

By Sandy Botkin
Co-founder at Taxbot
Sandy is a CPA, Tax Attorney, and former IRS trainer. He has authored many helpful books on the subject of taxes

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Posted in: Taxes