What to Do If You Are Audited by the IRS

If you are audited, it is important to keep in mind a few things. First, if you can afford to pay the government what they say you owe, pay it. Interest accumulates incredibly quickly on outstanding taxes at rates that well exceed customary loan rates from financial institutions. If you ignore the auditor, the amount they say you owe will continue to grow.

Second, the IRS has a wide range of penalties they impose for negligence, fraud, and failing to file a tax return, among other things. Even if the IRS wins, and the Government says you owe what they say, penalties, unlike interest, can be waived and many IRS officers have the authority to issue that waiver notwithstanding their use of penalties to scare little taxpayers like you or I into compliance.

Third, deadlines are essential. If the IRS says you should respond to a letter within 30 days, then you should respond even if you are scared. But you should never sign any IRS form that you don't understand. For instance, IRS auditors come equipped with forms that the IRS uses to ensure that interest continues to accumulate while the audit is ongoing.

Fourth, get help. Voluntary programs exist all over the country that provide free legal representation before the IRS. Even Law Schools get into the act. For free, many law schools with a Tax Clinic will assign you a law student as your legal representative before the IRS. And, don't worry, because the law student assigned to your case is always being supervised by a licensed attorney.

Finally, don't rely solely on conventional help. Take a tip from the big corporate taxpayers who yell and scream to get their way. If you genuinely believe you are correct, don't hesitate to write to your Congressman or Congresswoman. Don't editorialize in your letter. Screaming irrationally about the IRS will get you written off as just another "nut." Intelligently phrase a letter to your representative in Washington that details as plainly as you understand the conflict, what you believe to be the facts of your case and why you believe you are entitled to your way.