Preparation for a successful audit begins years before you ever hear from an auditor. The best way to avoid unpleasant surprises is to be sure that returns are filed properly in the first place.

Most small businesses should be using the services of a good tax accountant or tax attorney to prepare or review their returns. Make sure that any potential issues that may affect your tax liability are thoroughly discussed and reviewed before you file the return.

If you contact Maine Revenue Services or the IRS with a question affecting your return, you should know that in most cases the informal answer you receive will not be binding on them.

It may help to avoid any penalties, but only if you get the answer in writing.

The root cause of a large tax assessment is frequently due to a taxpayer's inability to document fully items claimed on a return. Discuss with your tax professional what records to keep and for how long.

Once the audit begins, you should almost always ask your tax attorney or accountant to assist you.

By far the least expensive and least time-consuming way to resolve any factual or legal issue is to do so directly with the auditor at the time of audit.

Many issues that can substantially reduce the size of any assessment involve technical legal and accounting concepts that a professional is trained to spot.

These issues may include statute of limitations areas, general statutory interpretation and even constitutional issues. In addition, your tax professional has the tools at his or her disposal to research and prepare a convincing argument on your behalf, such as regulations, cases, rulings and treatises affecting your particular issue.

Most auditors are flexible as to when an on-site audit will be scheduled. Generally, an auditor will be amenable to scheduling the audit at a convenient time for the business.

For example, if you are operating a seaside motel, an auditor may agree to wait until after the busy summer season.

Obviously, anyone being audited should treat the auditor with the utmost respect and courtesy. Provide the auditor with a quiet place to do the auditor's job.

Generally, the more cooperation the auditor receives from the taxpayer, the faster the auditor will be able to conclude the audit and move on to the next taxpayer.

Make sure that (depending on the size and nature of the business) the business owner, the controller or another appropriate person will be responsible for the audit and available to work with the auditor "hands-on."

This person should be in regular communication with the auditor and know the issues under review, areas of disagreement, and required documentation.

The best way to avoid dispute is to know the areas of concern as early on as possible and deal with them appropriately. In addition, the person at the company responsible for managing the audit should keep a record of all documents provided to the auditor.

If the auditor has questions or a list of documents he or she wants to review, it is a good practice to ask the auditor to put those requests in writing.

Similarly, take notes during important conversations with the auditor and keep memos on file.

In coordination with your tax professional, request a meeting with the auditor and, if necessary, the auditor's supervisor, to deal with areas of dispute.

Generally speaking, waiting to present your case until the final meeting at which the auditor presents his findings and any proposed assessment is too late to make a difference.

When meeting with the auditor, you should present documentation supporting your position. If the disagreement involves an interpretation of the tax laws or regulations, you should also present a well-reasoned, written argument.

Auditors respond well to facts, documentation and well-reasoned legal arguments but do not generally respond well to impassioned pleas or pressure.

If you cannot resolve the issue with the auditor, you can ask for a meeting with the auditor's supervisor. Ultimately, you will have the right to protest or appeal the auditor's findings.

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