Tax Audit Do's and Dont's
The IRS may ask to audit business returns at the taxpayer's place of business. Few restrictions are placed on the IRS as to how to conduct an audit except that the time and place of examination must be reasonable under the circumstances.
The IRS is prohibited from engaging in unnecessary examinations. It also may not make more than one inspection per year unless it sends additional notice to the taxpayer. This is intended to curb abuses of investigation powers by IRS agents.
1. I recommend you immediately contact to your CPA upon reciept of any mail from the IRS. Be sure to give him/her a complete copy of the mail you receive, including all of the contents, the envelope and any notices or statements about your rights contained in the envelope.
2. Never discuss any issues with an IRS agent without your CPA present. Often questions are asked which are seemingly innocent chit chat but are designed to dig a great big pit for you to fall into.
3. Never allow a government agent into your home, unless they have a search warrant or some other legal authority to do so. If they come to your home to talk to you, meet them outside of your home, no matter what the weather.
4. After you sign a Power of Attorney authorizing a CPA to represent you, never speak to any representative of any tax authority and never respond to any questions that they ask. However, if you are contacted by an agent (a) obtain their name and phone number, (b) tell them the name of your CPA, and (c) ask them not to call you again but rather call your CPA. Record every contact by a government tax representative, whether in person or by telephone. Take down their full name (make sure they spell it for you) and phone number. Record date, time, location (e.g., your home, office, etc.) and what you discussed.
5. When your receive mailed notices and letters, keep everything together; the envelope and all the contents from any tax authority, including any notices or statements about your rights contained in the envelope.
6. Never be discourteous. If you believe that the government tax representative was discourteous, abusive or unreasonable, contact his or her supervisor, or your CPA for help.
7. Let your CPA be honest with the tax representative but do not volunteer any more information than specifically requested. Never provide any explanations without consulting your CPA. Never give a form to a government tax representative that contains an untrue statement.
8. Never deal with, and promptly terminate, any tax advisor who advises you to tell an untruth to any government tax representative, or advises you to give a form to a government tax representative that contains an untrue statement or that contains false information about income or deductions. In both of these situations, an experienced CPA will have a better solution than to be untruthful.
9. If you agree to call, or to do something for, a government tax representative at or by a certain time, do not ignore the deadline. If you are unable to comply with the deadline, make contact with the government tax representative and obtain an extension of the time to comply.
10. Never voluntarily give original records to any tax authority. If they have the legal right to seize them, do not interfere with the seizure. If you give tax records to a government tax representative, always give them only copies.
11. If you are asked to complete an IRS Form 433-A, do not complete it without the assistance of an experienced CPA unless you have no income, no assets and are being supported by another person or entity.
12. Never tell any government tax representative how much cash you had at any time that was not in a bank account or other financial institution without the advice of a CPA.
13. At the termination of an IRS tax audit, never sign any documents especially IRS Form 4549 (or CG 4549) without the advice of a tax advisor.