Yes, fear of being audited by the IRS can make even the most stalwart taxpayer panic. But, according to the Wisconsin Institute of CPAs, an audit should be viewed as nothing more than an impartial verification that you have reported all your income and are entitled to the exemptions, deductions, and tax credits claimed. Carefully read the letter from the IRS to verify that the information is correct. Be sure you understand what you are being asked to do. Respond promptly but don't hesitate to ask for a postponement if you need more time to assemble your records.
Preparation is the key to getting through the audit as painlessly as possible.
Be sure to review each entry on your return, organize your records, and identify potential problem areas. You can choose to handle the audit by yourself, have a representative, such as your CPA, go with you, or have him or her go in your place. Most experts recommend that you do not attend your audit. If you decide to attend the audit and address the questions yourself, it is important that you provide exactly the information needed to answer a legitimate request by an auditor and no more. Answer questions honestly but briefly, and hand over only the documents needed to support the deduction being questioned.