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Risk of loss (RoL) is one of those concepts that every business person knows about but...

Risk of loss (RoL) is one of those concepts that every business person knows about but doesn't want to acknowledge, something like knowing that you can be audited by the IRS but hoping that you will never be selected for an audit. With that caveat in mind, when goods are damaged or destroyed, which party bears the burden of the loss---buyer, seller, or warehouser (or carrier)? That is, in determining RoL, what factors do courts consider?

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If someone else prepared your return, let him or her know about the audit and ask for tips on how to get ready for it. Whether you want this person to go along may depend on how much that would cost. Although the IRS prefers to wrap up cases with one meeting, if you dont agree with the auditors conclusions or need time to round up extra evidence, you can schedule a follow-up meeting. Unless you fear you might capitulate if you go to the audit alone, you may want to try to settle as many issues as you can by yourself. If disagreements remain and the amount of money at stake justifies the expense, you can take an adviser along to the next session. That way youll have help when you really need it but wont have to pay for hand-holding while you clear up routine matters. And note this: The Taxpayer Bill of Rights gives you the right to stop an audit in its tracks if you decide you want representation. If the audit begins to veer off of the topics you are prepared to discuss, for example, you can call a halt to the proceedings and seek help if you need it.The key to success is being well prepared. Forget the old slapstick routine of dumping a box of canceled checks and ratty receipts on the auditors desk. That suggests your records are sloppy, and thats the last impression you want to give. Remember, its up to you to back up the information on your return. The better organized your records, the more smoothly things will go Establish credibility right from the start. If you do, theres a better chance a gap later may be overlooked. Say that the audit notice states that your interest deductions, charitable contributions, and travel and entertainment write-offs will be reviewed. If youre solid on interest and contributions but shaky on T&E, try to steer the audit to your strong suits first. Dont go into the session looking for a fight, but dont equate being cooperative with giving in whenever the auditor raises an eyebrow, either. If the agent tells you your records dont substantiate a deduction, for example, ask what might suffice. Perhaps you can mail it in later. Dont chat your way into a problem. Keep in mind that the agent is trained to zero in on tax issues. A comment you consider totally unrelated to your return might lead you into a thicket. Defending a deduction by saying youve taken it in the past, for example, could prompt a review of previously filed returns; discussing the familys cross-country driving vacation might lead the agent to recalculate the ratio of business/personal miles for your car; or bemoaning the problems that led a child to drop out of college could cost you a dependency exemption. Fear that taxpayers will talk themselves into trouble is the key reason many advisers recommend sending a representative to the audit rather than showing up in person.

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