How to Survive your First IRS Audit

Nobody wants to be audited by the IRS. But if you do I am here to help you. The following are items you should have available to help me help you.

Records Needed

Maintain your records. Preparation for an audit should begin long before an audit occurs. Keep the following:

  • Primary records of bills and receipts.

  • Secondary records such as mileage logs, spreadsheets or other summary information.

  • All tax returns.

  • All backup information for the current and past three years.

  • If you have a business have a separate bank account for the business. Only deposit income for the business and pay legitimate business expenses from the business account.

If the examination is pertinent to a specific issue, gather all relevant documentation on the issue in question. The letter your client receives from the IRS will list the items being questioned. If more time is needed to gather the required information, a request can be made well in advance of the examination date.

If the entire return is being examined, the documentation requirement will be more extensive. If the return being audited is a business return, the auditor will very likely perform a bank deposit analysis. This is one of the main reasons you need to keep separate bank accounts for your businesses.

Examination Locations Examinations of returns may be done via mail, at the examining representative’s office, in your home or business, or if you wish my office.

In home examinations are particularly dangerous. This allows the revenue agent to obtain information on your standard of living that might be inconsistent with the tax return that was filed. It also gives the examiner an opportunity to examine things like the ‘home office’ where you may be taking a deduction.

Non-business items located in the room or area designated as the home office will not help your case in defending a home office deduction.

Mental Preparation

Dealing with an IRS examiner can be stressful. Before you go into the examination, put yourself in the auditor’s shoes. Anticipate items that the auditor will want to review and then thoroughly examine each item. Ensure there is documentation for all deductions—especially those that are questionable.

You should also ensure that you are thoroughly familiar with the entire tax return being examined, and be able to explain in detail the source of each item on the return.

Organization is Key It is important the documents you are providing the auditor are presented in an organized manner. This includes receipts. Do not present the auditor with a box of unorganized receipts.

And, of course, don’t give away too much. Only provide documents needed to prove a deduction or income. Providing too much information could cause the examining agent to review areas that might not have been considered before.


IRS examiners have credentials -- ask to see them and note the serial number -- but don't panic. If the IRS Agent's credentials also includes a "Gold Badge" -- PANIC -- do NOT answer any questions and get a criminal defense lawyer!!!

Source: Tax Pro Today