Tax Audits

By Jerry Stewart

A listener wrote requesting more information about tax audits and just what happens if, as a taxpayer, the IRS decides to audit you. Well, interestingly enough, I ended up having a meeting with a new client just that next day and he's in the middle of his own IRS audit. Unfortunately, he had already gone through a big part of the audit and he and his representative made what could be some errors fatal to his audit success. Let me tell you what I told him.

First, believe it or not, IRS agents and auditors are not ogres. They're most all nice people doing a job. Oh, you'll find a few jerks working for the IRS, but I believe not more than any other occupation.

Second, and here's the hard pill to swallow, most IRS audits and inquiries are based on errors and oversights made by the taxpayer... you and me. I have five mail audits by the IRS in my office right now, and each one is because my client made a mistake on their return. An incorrect social security number, income earned never reported, errors they made themselves.

"But," you say, "Just what do I do if I am audited?" Well, the first thing you don't do is represent yourself. There's a saying in court cases like this. "A defendant who acts as his own attorney has a fool for a client." Now that's a little harsh, but the theory is valid. You don't act on your own behalf to represent yourself in a situation where you don't know the rules of engagement and how the game works. And that is no different tax audits.

I have heard of some tax preparers who say up front that they will not represent you in the case of an IRS audit. If that's the case for you and your preparer, I have these simple words of advice for you - "Dump him (or her)!" Having a tax preparer who will not stand behind his work in an audit, who will not represent you, is a preparer you don't want. You want someone to represent you who know the law as good or better than the IRS and is able to go into the arena of battle for you.

Next week, I'll talk about the five simple steps you want to follow to make your tax return virtually audit proof. I'm Jerry Stewart, reminding you to keep those questions coming in. After all, It's Your Money!