Top Ten Tips for Surviving an Audit

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

  • What you will  need to do. In an 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.
  • 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. You may even request a transfer to a different office of the IRS if there are facts to support that request.
  • 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 representative  handle it. Field audits (at your place) are used mainly when there is business income; consult a tax professional before hosting a field audit. You should avoid meeting personally with the auditor.
  • Prepare your records. If you are missing receipts or other documents, you are allowed to reconstruct records. However, you must be candid and honest in what you provide. Providing false or falsified documents can lead to fraud penalties and even criminal prosecution.
  • Have reasonable expectations. Don’t expect to come out of the audit without owing something — the odds are against you.
  • Don’t be afraid to advocate or compromise the issues. Don’t try to compromise on the amount of taxes to be paid; instead, negotiate the tax issues with the auditor. Auditors will sometimes engage in tax issue horse trading with taxpayers if the taxpayer provides strong legal arguments. This is another reason to hire a professional to represent you.
  • Don’t answer unless asked. Give the auditor no more information than he is 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. IRS can ask for them, but don’t offer them before asked. 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.
  • Research the tax issues. Research tax legal issues by using free IRS publications and commercial tax guides. If you are still unclear about the tax law or how to present your documents to an auditor, consult a tax professional  before the audit.
  • Know your rights. Read IRS Publication 1, explaining the Taxpayers’ Bill of Rights, prior to your audit. If the audit is not going well, demand a recess to consult a tax professional . 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. Immediately seek legal counsel. Do not use a CPA or non lawyer. Only lawyers can offer attorney client privilege. Anything you tell any one else including your accountant is discoverable by the IRS.
  • 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. However, IRS often requests the taxpayer to extend the statute of limitations.
  • Appeal the results. When you get the examination report (Revenue Agents Report), call the auditor if you don’t understand or agree with it. Meet with her or her 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. Also, consult a tax professional.

About the Author
D. Steven Yahnian has been a member of the California Bar and a practicing Attorney since 1980. He has also been a California CPA since 1984. Mr. Yahnian also holds the CFP® designation.

Mr. Yahnian practices in the following areas of law through YAHNIAN LAW CORPORATION:

  • Tax Planning, Tax Debt Resolution and Tax Litigation
  • Business & Corporate Law & Planning
  • Estate Planning & Administration
  • Real Property Law & Planning
  • Asset Protection Planning

As a CPA/CFP, Mr. Yahnian also has a separate accounting and tax return preparation practice called DSA ACCOUNTING.

Mr. Yahnian is a California State Bar Certified Specialist in the following
• Taxation Law and
• Estate Planning, Trust & Probate Law.

Mr. Yahnian received a B.S. degree in Accounting from USC, a J.D. from Loyola University of Los Angeles School of Law and an LL.M. in Taxation from New York University Law School. He also has a Certificate in Taxation from UCLA (with distinction).

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