Top Five Tips for Handling an IRS Audit

Whether you're doing it yourself or you've hired a tax debt professional to do it for you, handling an IRS audit can be a very stressful and confusing experience. Maximize your chances of success by examining these five suggestions before undergoing any examination by the IRS.

1. Define IRS Audit Success

Before you can be successful, you have to define success. In the case of tax debt relief, success may mean the complete erasure of the tax debt, a lowering of the balance, or IRS acceptance of a certain repayment plan. Less than 25 percent of all IRS audits result in a taxpayer getting off scot-free, so if that's your definition of success, make sure you have a clear justification for why you're worthy of that rare outcome.

More regularly, taxpayers find tax debt relief in settling on a reduced amount of tax debt, and then paying that tax debt back through a manageable installment plan.

2. Don't Talk Too Much

IRS auditors are well-trained in the area of letting taxpayers hang themselves. Do not fall victim to that technique. Instead, answer questions as best you can and then keep silent.

3. No Receipt Does Not Necessarily Mean No Deduction

Contrary to popular belief, you do not need to have retained every single receipt in order to claim a legitimate deduction. If you are missing some receipts, or even if your records are a total mess, do not hesitate to speak up for your deductions, so long as they're legitimate.

This often happens with self-employed people, who are typically so busy running their businesses that record-keeping becomes a last priority. As long as such a business owner can show that undocumented deductions--mileage, for example--is "reasonable," that is sufficient for most IRS audits.

Protecting deductions is a prime way to reduce tax debt during an IRS audit.

4. On Difficult Issues, Ask for More Time

IRS auditors handle multiple cases simultaneously, and are expected to close cases on a regular basis. Use this to your advantage and, when you need it, ask for more time. Publication One, known as the Taxpayer's Bill of Rights, explicitly states that an IRS auditor must, upon a taxpayer's request, stop and reschedule an audit that's going badly.

Taking a timeout to speak with a tax debt professional or even the IRS' own Taxpayer Advocate Service may be the best thing a taxpayer can do to obtain tax debt relief during an IRS audit.

5. Act In Good Faith

The idea of acting in good faith, of not engaging in trickery or obfuscation, is one of the most important parts of any interaction with the IRS. Strive to deal with the IRS (or any other taxing authority, for that matter) in the most straightforward manner possible.

Taxpayers who are able to give off the good faith vibe, even if they owe significant tax debt, should find that acting in good faith towards the IRS will elicit the same response from that agency. Certainly taxpayers who take an opposite approach risk meeting with a distinctly unaccommodating negotiating partner.

About the Author:
Andrew Freiburghouse is a freelance writer and editor living in Brooklyn, NY. He has worked in a variety of fields including magazine journalism, tax preparation, screenwriting, copywriting, and real estate. He graduated from Santa Clara University in 1999 with a B.A. in English. A regular contributor at tech blog Edgelings.com, Andrew was born and raised in the City of Los Angeles. He hopes he will survive the New York winter.