How To Approach An IRS Audit
Don't panic if the IRS has singled you out for an audit. You have time to prepare yourself. The more time you can put between the initial contact with the IRS and your first appointment with the agent, the better off you'll be. Agents are under pressure to close their cases within a specific period of time. The longer your case been on the agent's desk, the more likely he is to rush through the audit, which can only be to your advantage.
The day before your appointment call to ask for an extension or postponement. Don't do this when you first get the appointment letter. By waiting until the last minute, the agent will probably be booked up with other appointments for a month or so. If you can come up with a legitimate reason for the extension you can usually postpone the audit for up to six months. However, don't ask for a postponement without a good excuse. If the agent simply thinks you are stalling you run the risk antagonizing the agent. Antagonizing an IRS agent is generally not in your best interest.
Prepare carefully for the audit by collecting and organizing all your receipts for the deductions the IRS is questioning. Don't just dump them on the agent's desk. List them all in detail on a sheet of paper or in a spreadsheet. Also, reconstruct cash expenditures for which you can't find the receipts. Be prepared to explain exactly how, when, and why you made those expenditures. By being as detailed as possible you will establish your credibility in the eyes of the agent. Credibility is the most important thing at an audit. It will be much easier for the agent to allow items for which you have no receipts if you can show him that you have some receipts, and that you actually made an effort to comply with the IRS requirements, and that you've reconstructed to the best of your ability.
Don't expect to walk away from an audit scot-free. Your objective is to come up with the best possible deal. Keep referring to the items the auditor says must be adjusted. Don't give up until he actually reduces the adjustment. Most agents will concede some proposed adjustments if you're persistent, but you must prepared to compromise. You need to concede some items that you're weak on. Be aware that the agent wants to close the case as quickly as possible and move onto the next audit.
The day before your appointment call to ask for an extension or postponement. Don't do this when you first get the appointment letter. By waiting until the last minute, the agent will probably be booked up with other appointments for a month or so. If you can come up with a legitimate reason for the extension you can usually postpone the audit for up to six months. However, don't ask for a postponement without a good excuse. If the agent simply thinks you are stalling you run the risk antagonizing the agent. Antagonizing an IRS agent is generally not in your best interest.
Prepare carefully for the audit by collecting and organizing all your receipts for the deductions the IRS is questioning. Don't just dump them on the agent's desk. List them all in detail on a sheet of paper or in a spreadsheet. Also, reconstruct cash expenditures for which you can't find the receipts. Be prepared to explain exactly how, when, and why you made those expenditures. By being as detailed as possible you will establish your credibility in the eyes of the agent. Credibility is the most important thing at an audit. It will be much easier for the agent to allow items for which you have no receipts if you can show him that you have some receipts, and that you actually made an effort to comply with the IRS requirements, and that you've reconstructed to the best of your ability.
Don't expect to walk away from an audit scot-free. Your objective is to come up with the best possible deal. Keep referring to the items the auditor says must be adjusted. Don't give up until he actually reduces the adjustment. Most agents will concede some proposed adjustments if you're persistent, but you must prepared to compromise. You need to concede some items that you're weak on. Be aware that the agent wants to close the case as quickly as possible and move onto the next audit.