Nothing creates panic like a letter from the IRS announcing an audit. Take a deep breath, reread the notice and get ready to rumble.
Don't assume the IRS is right. Many people get notices saying they owe money. Most result from simple data or reporting errors the tax authorities believe you made. "But there is a good chance the notice is incorrect," said Larry Elkin, a certified public accountant with Palisades Hudson Financial Group in Scarsdale.
Don't just pay the bill. Check the facts, or ask your tax preparer to investigate. If the tax authorities' figures are wrong and yours are correct, you should be able to clear up the matter routinely, said Elkin.
Don't go it alone. Get a CPA, tax attorney or IRS-authorized enrolled agent. A pro will find out what the auditor wants to know, gather the information and present it clearly and concisely without triggering additional issues. "One of the biggest mistakes you can make is to represent yourself," said Barbara Kaplan, a shareholder with the law firm of Greenberg Traurig in New York City.
Cooperate during the audit. If an auditor raises an issue and you're wrong, confess. "Owning up builds credibility that might earn you the benefit of the doubt on other issues, such as minor gaps in your records," said Elkin.
What shouldn't you do? David Selig of Selig & Associates, a tax representation and advocacy firm in New York City, said: "Don't volunteer any information that isn't asked of you, and never discredit your own tax return."