Rule # 1: The IRS Audit Process is an Adversarial Relationship! IRS Auditors are looking for adjustments to your tax return that convert into additional taxes, penalties, interest and a nice promotion or bonus.
In working as an IRS Revenue Agent (field auditor) in the Atlanta District office for six years, and representing taxpayers in IRS tax audits over the past twenty years, I believe that I have a special insight into the IRS audit process.
Rule #2: In all IRS Audits, Separate the taxpayer from the IRS Auditor! Many IRS auditors try to intimidate and bully unsuspecting taxpayers into paying more tax than they legally owe. I abhor this practice but unfortunately it is a way of life within the IRS Audit Division. Sign a power of attorney and either have a CPA or other representative go to the IRS with your records. You should also consider having the IRS auditor go to your CPA or representative’s office. You do not need to be present for the IRS audit.
Rule #3: Be Prepared! Being prepared for the IRS tax audit is half the battle, and includes gathering your records and having an idea as to the questions you will be asked. You should know that the auditor will ask you to produce your personal bank and savings account statements for their perusal and comparison to income reported on your tax return.
If a deduction for business use of a vehicle was claimed, be prepared with substantiation to support the vehicle’s business use. Knowledge of income tax laws, regulations and case law is the other half of this battle. This is why I maintain an extensive income tax library and you better believe the IRS auditors have access to an extensive audit library.
Rule #4: Be Courteous. The IRS Auditor is a human being with a family and may be a very nice person away from his or her job. Keep your responses polite and professional and try to honor their document requests. However, in responding to an IRS document request, beware fishing expeditions. This is a request for information that may be beyond the initial scope of the examination that could lead nowhere but do increase your frustration level as you gather the documents. You want to cooperate with the auditor but at the same time realize that you have certain rights and there are certain boundaries to the audit.
FYI: Finally, always keep in mind that an IRS field agent or office auditor only proposes adjustments to your income tax return. There are several IRS administrative and judicial reviews available to you after the initial audit process.
If you're suffering through an IRS Income Tax Audit:
1) You have my understanding and sympathy
2) Call me if you need help @ 770-969-9850
3) Good Luck!