Published on September 18, 2014
to say and do. The $1,650 I spent on mine was a bargain compared to the thousands the IRS was claiming I owed. Don't volunteer information . Be honest and forthcoming, but answer only what you're asked. Don't provide any more documentation than requested, as each additional piece of information is another chance to uncover errors. Don't file a tax return during an audit . If you do, the audit could expand to include the new information. I received notice of the audit in late March, just before I was due to file my 2013 return. My accountant applied for an extension immediately. Get organized . As soon as you receive the audit notice, start gathering the requested information. This process will take longer than you think, especially if you're like me and discover that some pieces are missing. It can take weeks to receive duplicate statements from your bank or broker. Get it on paper . The IRS doesn't deal with electronic files during an audit; only a paper trail will do. I learned the hard way that many financial institutions keep statements available online for download only for a few months. Now I print out all my statements as soon as they become available. Be courteous . You may hate the IRS and resent the audit, but don't take it out on the auditor. Be polite and professional. Imagine that you're at a job interview, and act accordingly. Change your habits . It's easier to get organized now than to create a new system under duress, like I did. After my audit, I adopted an embarrassingly simple step: I labeled a file folder "2014 taxes," and I've been placing all the year's financial documents there. A Fighting Chance I found the IRS website to be surprisingly helpful, specifically the 10-lesson video series "Your Guide to an IRS Audit," which provides basic information about the small-business audit process. Another great source for tips is Stand Up to the IRS by tax attorney Frederick W. Daily. The entire text of the book, in print since 1992 and updated in 2012, can be found at TaxAttorneyDaily.com.