The best thing to do if you receive a notice saying you will be audited is to not panic. You should speak to the auditor and refer him or her to your tax professional so that you have a better understanding of the situation. Getting the situation organized is a great thing to do. Make sure you ask the Internal Revenue Service, or IRS, why you have been selected to be audited. Some reasons could be that you were randomly selected by computer; your business was part of a program to test compliance in the industry; or an employee, co-worker, or competing business told on you.
When handling an audit, be sure to do the following:
- Be organized
- Give them only the documents needed to support the deduction being questioned
- Never give the IRS agent more or less information than is requested
- Answer questions honestly, but briefly
- Never give the IRS the original, and often, only copy of a document. Make copies of the requested document(s).
- Don’t chatter or exchange casual conversation. Each comment only gives them more information.
- Stay calm. Don’t be argumentative or belligerent.
- Wait until your representative has time to review any documents before you sign one
If you are aware of what you should be doing and have all the correct information, the audit should go smoothly. Having a representative with you could help you stay out of trouble, legally. Always be prepared when you are speaking with anyone from the IRS. You do not want any mistakes to happen when dealing with them.