The word "audit" is perhaps one of the most dreaed in the English language. It conjures up images of nasty, greedy tax auditors and lawyers licking their chops as they prepare to consume their defenseless prey - the hapless, innocent taxpayer.
But an IRS audit needn't be a cause for fear, alarm or worry. If you follow proper IRS filing procedures and are honest on your business or income tax return, a tax audit is little more than an inconvenience.

An audit is merely a review of a previous year's tax return by the IRS. They check for inconstistancies or "red flags" that could reveal dishonesty, mistakes, or tax fraud.

Don't dilly-dally

You typically have 30 days to respond to an IRS audit notice. If you don't answer the notice, the IRS can take action (including automatically adjusting your tax liability!), and the next thing you know, you're getting a bill in the mail. So don't make that mistake. Respond right away. The notice will give you information about what portion of your return/documents are being examined, which will help you determine what you need to bring to the audit to defend your claims.

Get organized Making the auditor's job easier by having your records in order will help your cause in many cases.
It tells the auditor you're organized, and perhaps if you have the right documents, it signals you have nothing to hide either.
So gather up your receipts, statements, notes, check stubs and anything else documenting your income, liabilities, losses and deductions. If any of your records happen to be missing, then make every effort to replace them. In this day of digital media and permanent records, there is absolutely no excuse not to have receipts and other doumentation for your income and deductions. If you don't have the records, then request new copies from lenders, employers, etc. Make copies of everything and keep the originals in a safe place, giving the copies to the IRS agent.

Get representation

It might cost a bit of hard-earned cash to hire a tax attorney, but it evens the playing field. The IRS has their tax experts and you need to have yours.
There's a reason why lawyers make so much money - most of them are very good at what they do. Hiring a good attorney could save you thousands of dollars when it's all said and done.

Part 2: Know your rights