Tips for Surviving an IRS Audit:
1). Don’t ignore the audit notice or the next piece of correspondence you receive could be a bill.
2). Supply exactly the information that the notice is asking for – don’t show other items as this could raise additional questions.
3). Organize your records so the auditor can find everything quickly and easy.
4). Replace missing records. An auditor won’t skip items just because you can’t find your documentation and it is your responsibility to prove the deductions.
5). Stay on point and keep your answers short preferably with a yes or no. There is no point in chatting as this could raise additional questions.
6). Know your rights and try to settle any difference sat the audit. If this can not occur, you can request a conference with the IRS Appeals Division.
7). I always recommend you hire a tax advisor to go instead of you. He/she has the knowledge and will not be emotional during the testimony.
How Does the IRS Select Its Audits:
1). Computer Selected Audit occurs when a businesses income or expenses fall outside the norm for its size or industry. This is the most common way an audit is triggered.
2). IRS Special Projects occurs when a business falls into a certain category that the IRS is studying such as offshore credit card use.
3). Informants may trigger an audit by tipping off the IRS. Informants are usually a disgruntled employee.