IRS Audit Defense

By Dave Horwedel, EA

Your worst fear has occurred. The IRS is auditing you. Whether it is a correspondence audit by mail, an audit down at your local IRS Office, or an IRS Field Audit in your home or business, it is stressful.

You can represent yourself in an IRS Audit, and you may even achieve a successful result. Then again, it is possible to walk away unscathed from pulling the trigger in a game of Russian Roulette.  Unless you are talking about a correspondence audit with minor money involved, it is probably unwise to represent yourself.

One could argue that if you are totally honest and have excellent records, and have done your taxes correctly, you have nothing to fear in an IRS audit.  And there is truth in that.

But what if you fibbed a little, or your records are spotty, or your return was not done perfectly?

Now we are getting to a more common situation. It does not mean you evaded taxes or paid less than you were required to. But perfection and taxes do not commonly appear together in front of an IRS Auditor.

So, what do you do if you are under an IRS Audit?

First, you sign an IRS Power of Attorney. Then you have your tax professional, such as an Enrolled Agent, lawyer, or CPA, review your tax records. Your tax professional will get full IRS transcripts. This gives the professional the data that the IRS has on you. If a debt is owed, a completed financial questionnaire is needed.  from you. This will allow the professional to propose solutions to tax debt that would work for you and meet IRS guidelines.

The tax pro can see any errors in your returns or records and correct them.  He then meets with the IRS or corresponds with them, and works out a solution.  It is usually wise for the taxpayer to keep his mouth shut and leave this to the pro.  The pro of course knows what the IRS is supposed to ask and how to respond to them.

Also, if the IRS asks a question that catches him by surprise, he can say “Wow! $30,000 were  deposited into the account by Jones Industries and not reported as income.  I have no idea what that is. I will have to check with my client.” And then come back the next day with the explanation that the $30,000 was a loan from Uncle Bob Jones’s company and not taxable income at all.

Do not get me wrong. We do not LIE to the IRS and we do not countenance our client’s lying to them. But in the heat of an IRS audit interview, it is easy to make a mistake and it can be disastrous. The Pro can come back the next day and put whatever the situation is, in the best possible light.

At my firm, we do a lot of audit defense for clients whose original tax preparer was not trained in IRS Representation.  Sometimes the tax return was simply done wrong.

We take the cards we are dealt and then make the best of the situation.

Just because the IRS says the return was wrong DOES NOT MEAN THE RETURN WAS DONE WRONG!  Even if there were errors on the return, this does not mean the  IRS correctly calculated the amount you owe.

One cannot count on the IRS to find every tax break you were entitled to!

Also, experience and training help enormously in getting penalties released.

Sometimes, one finds oneself dealing with an arbitrary or not fully competent auditor.

Knowing what recourse is available and what to say, and which recourse to use are critical here.  Asking to speak to their manager, going to appeals, or contacting the Taxpayer Advocate all have their place in dealing with the IRS.

Going to Tax Court or submitting  an Offer in Compromise are also tools that come in handy if needed.

If you are under tax audit, contact Guard Dog or Torchlight Tax for a free consultation.  Our team will review your situation and recommend the best possible handling.

This requires a higher level of skill than just doing a tax return. Many tax return errors go by unnoticed when filed and are handled by computer.  This does not occur in an actual audit. Rest assured there will be a live human reviewing  the cycle at some point.

Contact us for a free consultation at 1-877-758-7797. You can also review our websites at or or email us at