At some point in an audit, the IRS may ask you to sign an extension to the normally applicable statute of limitations. Normally the IRS has three years from the date you file your return to complete an audit. If you filed your 2008 personal return on April 15, 2009, the IRS has until April 15, 2012 to complete an audit.
When the IRS has less than one year left, before the period ends, it will ask you to voluntarily agree to extend the statute for an additional one or two years. You should politely respond "no" in writing. Point out that you have cooperated at every point in time and will continue to do so. However, the auditor has had plenty of time and will have plenty more before the statutory period ends to get any additional information and to reach any needed conclusions. The auditor may tell you that if you agree to some extensions the auditor will be able to clear up some issues and reach a favorable result. Don't take the offer. If you give the auditor more time, the file forwarded to the IRS Appeals Division will only get worse for you. You want the file to reflect inadequately considered and documented arguments. This permits you to approach the IRS Appeals Division with new facts and new arguments which is the only way you have a chance to end up with a more favorable result.
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