One thing that will certainly send shivers of terror down the spine of any taxpayer is receiving a notification of an IRS audit in the mail. While this can be a nerve racking experience, there are ways to do deal with the situation and make it a less stressful process. Below are 5 do’s and don’ts to follow when you receive an IRS notice.

Throwing away an IRS notice or putting it in your drawer hoping the IRS will just go away is not a good strategy. When IRS initiates an audit, your name (or your business name) is in IRS audit system and an audit report must be issued before your case will ever be closed. Therefore, it is critical to respond to the IRS notice before the due date.  However, it is not a good idea to call them right away. Read next…

After receiving the audit notice, you must contact a knowledgeable CPA who has extensive experience in dealing with the IRS. This may or may not be your current accountant. If you are not confident your current accountant  is well-versed in IRS Audit procedures,  it is highly advisable to seek a CPA with IRS experience. You should do this before you even respond back to the IRS.  In addition,  if you are represented by an experienced CPA, in most cases, the audit will be conducted at CPA’s office. However, there are some situations when IRS will insist on having the exam at your place of business. An experienced CPA can protect your rights and guide you in this process.

Make sure you have all the documents  requested by the IRS neatly organized for your CPA to review. Providing unorganized records to the IRS Agent will only prolong your audit and might potentially be a reason for the IRS Agent to expand the examination to other areas of your tax return.

You absolutely have to cooperate with the IRS agent performing the audit. However, cooperation does not mean providing to Agent documents he did not ask for. By providing only documents that were listed on IRS notice, you will help the Agent and your CPA to stay focused on the scope of the examination. This in turn will result in an expeditious resolution of your case.

IRS audit could be a learning experience for you. You will learn what the tax code says about the deductions you took on your return and where you or your accountant might have made mistakes. This will allow you to be better prepared for future audits. Remember, you are ultimately responsible for the accuracy of your tax returns and you should be proactively involved in educating yourself about the tax laws and your responsibilities.