Many people consider an IRS tax audit to be among their worst nightmares. Even as they make nervous jokes about being audited, people understand the grave legal and financial consequences that can come from being quizzed about their prior years' returns. However, you may be surprised to learn that the IRS does not always have the advantage when it comes to your audit. In fact, this organization routinely asks people to grant it an extension. You may at first be tempted to refuse this request. However, before you turn down their offer, you should consider some of the key reasons for granting the IRS an extension on your audit. 

Time to Seek Professional Legal Tax Help

If you were caught by surprise by your audit, you can gain more time to hire a professional tax firm by giving the IRS an extension. In fact, you would be well advised regardless of whether or not you give the IRS more time to show up to your audit with a professional tax adviser by your side.

However, this additional time will let you and your adviser figure out your case and gather documentation you may need to minimize or eliminate the risk of financial and legal penalties. When, it is time for your audit, you could be better prepared than if you did not give the IRS an extension at all.

Leeway to Stipulate Conditions

An extension can give you enough of an upper hand in your audit to demand a bit of give and take in the proceedings. If you give the IRS an extension, they should grant you a few circumstances that could work in your favor.

For example, it would not be out of the question for you to restrict the audit to a certain time limit. You may allow an audit of your past three years' worth of returns, but no more past that time. Likewise, you can make certain tax deductions off limit in the audit, giving you more opportunity to come out unscathed in this process. Your adviser can tell you what exclusions to ask for when you agree to an extension.

Avoid Assessment of Additional Taxes

As stated, you may be very tempted to refuse the IRS' request for an extension. However, doing so could result in this organization assessing more taxes against you. In fact, these extra taxes are sure to work out in the IRS' favor rather than yours. With that, it could be wise to give the extension as requested.

Preparing for Your Audit

As you prepare for your audit, you may wonder what steps you should take to make this experience as stress-free and smooth as possible. For starters, it would help you to know the typical time frames for which the IRS can audit you. In most cases, it has up to three years to audit one of your returns. You may not be notified until two and a half years after you file, however.

In other circumstances, the IRS can take up to six years to audit you if you failed to declare 25 percent or more of your income or did not report $5000 or more in foreign income. If you did not file a return at all at any point in your life, the IRS has an indefinite amount of time to audit you. It also has limitless amounts of time to investigate cases of fraud.

With that, if you are notified about an impending audit, you should make sure that you are likewise notified of your rights. You legally have to be informed about extensions and whether or not you are entitled to one.

You can also take remedying steps to minimize your legal or financial punishment by:

• Finding old tax returns and receipts
• Locating proof that you filed and submitted your returns
• Finding receipts and documentation for deductions
• Filing amended returns if possible
• Paying outstanding tax debts or new amounts owed after filing amended returns

These steps may not prevent an audit from continuing. However, they could help you escape monetary fines or jail time.

The IRS has the duty to collect every tax dollar owed to it. It accomplishes this goal in part by conducting audits on taxpayers when needed. You can prepare for an audit by hiring a professional tax firm, as well as locating documentation you will need to strengthen your case. You can also make the process as worry-free as possible by knowing when and why to grant the IRS more time with your audit.