By: A.J. Cook


When the dreaded summons arrives, can you survive?

There are certain dos and don'ts for making it through an Internal Audit.

First, here are the dos:

• Respond timely to every communication from the IRS -- even if you only request more time.  No response from you means the agency wins, and getting a reversal may be difficult or impossible.
• Call a tax attorney immediately if you willfully failed to file a return or you willfully under reported taxes. This can result in jail time. Don't even talk to your certified public accountant; the conversation is NOT privileged and can be used against you.
• If you need more information about rights or assistance, call the IRS at (800) 828-1040 or look at its Web site www.irs.gov.
• Organize your records for the years in question. Make it easy for the auditor to see you have support for the deductions.
• Postpone the audit if you haven't had time to prepare.
• If the audit involved complicated issues or large adjustments, hire a tax professional. An attorney, a CPA or a person authorized to practice before the IRS can represent you. This is no place for your brother-in-law.
• If the agent asks a question you don't understand or don't have a complete answer for, ask for more time to prepare a response.
• If the agent is rude or bullies you, you can report this to the agent's manager. If still dissatisfied, call the Taxpayer Advocate at (877) 777-4778.
• If the agent shows up with someone from the IRS Criminal Investigation Division, ask him to leave until counsel represents you. Based on information learned before or during the audit, an agent may suspect criminal fraud and bring along a CID agent. At the first sign of a CID badge, call a tax attorney.
• When the agent completes the audit and reviews the proposed adjustments with you, consider bargaining -- but don't appear to be too anxious. The agent may accept or even suggest a trade-off. A compromise would save you the trouble and cost of appealing.
• Appeal if there is enough money involved and you think you have a strong case. You can appeal within the agency or take the case to court.
  

The Moral: Minding your dos and don'ts can mean dollars and sense.

You can avoid getting hosed in the resulting shower of numbers by following the dos and don'ts of surviving an Internal Revenue Service audit. Here are the don'ts:

• Don't be rushed. If you need more time to get copies of paid bills or other supporting records, ask for the audit to be postponed. If you don't have direct evidence, the deduction can sometimes be supported by other means such as a letter from your employer or creditor or notations on your calender.
• Don't give the agent all your files, only what is requested. Allowing the agent to browse through all files can give ammunition for another challenge.
• Don't be chummy.  The agent is not there to begin a long-term friendship but to collect taxes. Your idle chatter may give leads to unreported income or shaky deductions.
• Don't volunteer information unless it's favorable to you.
• Don't tell the agent, "Everyone is taking that deduction" or It's never been disallowed before." Those arguments didn't work with your mother, and they won't impress the agent either.
• Don't antagonize the agent or threaten to write your representative in Congress.
• Don't lie. Never a good idea anyway and especially not to an IRS agent. If you are tempted to lie, ask for more time, then talk to a tax professional.
• Don't agree to adjustments too quickly. Tell the agent you want to sleep on whatever is suggested.
  

The Moral: Don't act in ignorance or haste unless you want to repent at leisure.