5 Things About Getting Audited
© JOE MARINARO

1. Audits are on the rise

You've sent your 1040 and so you're wondering whether the IRS will come calling on you.

Over the past ten years, the number of audits has risen every year. Accountants predict the trend will continue due to the increasing federal budget deficit and the additional $400 million allotted for tax enforcement in 2010.

Still your chances of being audited risk in any year is slim — about 1% if your income is under $200,000, 2% from there to $1 million, and 6% for the super-rich. Usually people who are audited are self-employed or have unusually large deductions. And remember, audit letters typically go out a year and a half after the filing date.

2. Don't delay

If you get the dreaded letter from the IRS, be sure to take the action quickly, usually within 30 days. Else the dispute becomes a final assessment and your only choice is to go to the collections department, with no grace period.

If you really must postpone, call the IRS immediately. They should grant such a request if you say you need the time to go over your records.

3. Think about getting professional help

Seventy-five percent of audits are done by mail. The IRS simply requests for documents (like receipts) on a specific part of the return. You can do this on your own. But if you asked someone else to do your taxes, get them to help you with the audit as well. And if the audit needs for you to personally go to the IRS, that's a sure sign the audit will dig deeper than it usually does. Having a CPA around will surely be a lot of help

4. Be careful what you say

Do not give information beyond what's asked for by the examiner. Try to remain as silent as possible during an in-person audit.

5. Try talking with the auditor's boss

If the audit yields unpleasant results, ask (nicely) to talk to a supervisor. The boss usually can offer more help than the front-line auditor. This can be very useful in resolving issues that fall into a gray area. If the results are still not to your liking, file an appeal. IRS officers always think about the costs of litigation-they can lose in court, you know — and offer you a deal. Or take it to the courts, but only if there's at least $10,000 at stake.