How to Survive an IRS Tax Audit

If the IRS sends you an audit notice, you may go into panic mode but learning how to survive an IRS tax audit isn’t complicated. The key to success is staying calm so you make good decisions. A skilled tax attorney can provide essential guidance but whether you use an attorney or not, keep the tips discussed below in mind.

What Should You Do If Your Are Audited By the IRS?

Assuming the audit isn’t the result of a simple error on your part or the IRS’s that is easily fixed, follow these general guidelines:

1. Educate yourself about the audit process. Even if you hire a tax attorney, it is a good idea to learn about audit procedures. There is information on the IRS website or read our short summary on What Happens When the IRS Audits You? on our website.
2. React and respond promptly to IRS notices. While you may be tempted to ignore a notice from the IRS hoping it will go away, that is a bad idea. It won’t magically disappear. Further, the longer you wait to respond, the more costly it will be to resolve the debt because you will have accrued additional penalties and interest and have to pay a tax lawyer for extra help in reversing IRS collection actions taken against you.
3. Get your records organized. You must gather all documents needed to defend a tax audit. If you are missing information, try to get it from third parties if possible, such as from the bank or a vendor you paid. You may also have indirect proof that can help substantiate your claim. Organize your documents in a way that’s easy for an auditor to review. If you need extra time to gather materials, ask for it.
4. Only provide requested information. The IRS will ask you for various documents. Respond with those records only. Don’t volunteer additional information. Also, make sure you keep track of what you send them. If the IRS is asking for voluminous documentation or making vague or general requests, you may be able to challenge it.
5. Be professional and courteous with auditors. Your auditor is doing his or her job. While you are understandably feeling anxious or angry, don’t take it out on the auditor. However, if the person is behaving inappropriately, you can lodge a complaint.
6. Know your rights. There is a Taxpayer Bill of Rights that includes the right to be informed, pay only the amount of tax legally due, challenge the IRS’s position, appeal the decision, and other rights.
7. Negotiate and consider settling. Just because the IRS says you owe a certain amount of money doesn’t mean you cannot negotiate the amount. You may also qualify for various relief programs, such as penalty abatement, offer in compromise, or installment agreement. It’s important to realize that even if you feel your position is correct, it may not be worth challenging the IRS. Settling your dispute may be the best option if you don’t have a strong case or it would be more expensive to fight than you would pay if you settled.
8. Appeal if necessary. If you disagree with the results of the audit, there are various avenues to contest the decision, but you must do this in a timely manner.
9. Hire a tax attorney. IRS tax rules and procedures can be complicated and there is significant potential to make a mistake or fail to take advantage of opportunities to reduce or eliminate your tax debt. An experienced tax lawyer can handle your audit to reduce your stress and help minimize your tax debt if possible.

Can You Handle Your Tax Audit Yourself?

If your audit is a simple manner of clarifying or correcting something on your tax return that will not result in a significant tax bill, then you may be able to respond on your own. However, if you have a more serious error, will owe more money, feel you have grounds for challenging your tax bill, or cannot afford to pay your debt, it is best to consult an attorney.

Our tax law firm has focused on helping individuals and businesses resolve their IRS and NYS tax problems for over 25 years. Contact us for a consultation today.