How to Challenge an IRS Audit

An audit from the Internal Revenue Service (IRS) is not something that anyone happily anticipates, but audits are a reality for many taxpayers. If you are unfortunate enough to have to fight an IRS audit, here are the steps you can take to survive the audit.

Difficulty: Moderately Challenging

Instructions

1. Decide if the fight is worth it. Challenging an audit is not for the weak at heart. It takes time and could potentially be expensive to survive.

2. Respond immediately. Whether or not you're going to fight the audit, respond within the time period the IRS allows for a response.

3. Hire a tax attorney in addition to your Certified Public Accountant (CPA). Do this only if you feel you have that much to fight for. This can be a costly step. However, if there is much on the line, it's well worth it. For smaller amounts or for low-income tax filers, visit the IRS website and view Publication 4134.

4. Defer all letters to your tax professionals. Some of the letters the IRS sends may have wording that can cause you to inadvertently divulge information that may not be in your best interest. Your attorney and CPA know how to handle these matters. Forward all correspondence to your team. After all, you hired them to represent you. Let them do their job and help you survive the audit.

5. Gather all accounting records and tax returns for the years in question. The more information you can provide to your team, the better.

Tips & Warnings

• The IRS has 3 years from the time you first file your tax returns to complete the audit, unless there is tax fraud or a gross underreporting of income.
• Review IRS Publication 1; it explains the Taxpayer Bill of Rights.

Resources

• Get advice from Ronald J. Cappuccio, tax attorney.
• Visit the Internal Revenue Service website for tax information and forms.
• Check out CNN Money for updated business news.

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