Welcome to Auditman all about audits, irs audits, financial audits, accountings audits, etc!
First and foremost you should always retain your IRS records, including expenses, receipts, tax documents and legal documents for six to ten years depending on the type of document. Here is a document on the tax document retention polices for Businesses
IRS Audits can be conducted via mail or in person. Any citizen has the right to representation by themselves or an outside attorney or agent. You also have the right to appeal to the IRS or the Federal Courts. For more information see this document.
Things not to do: Do not try and hide information from the IRS. Do not try and use Maritime Law or Admiralty law or 16th amendment was not "properly ratified" argument. These arguments have already been litigated in the courts and have all failed. Ref Ref2
People who make more than $100,000 are at the most at risk for tax audits not to say that those making less will not get audited. The simple truth is that the government has limited resources and must focus on those who are paying or perhaps not paying the most taxes.
Also you should be cautious, if your accountant is suggestion a way to save money on taxes that does not sound right, you should trust your judgment and question your accountant or tax professional. If he or she cannot provide a clear and reasonable answer you should get a second opinion from another professional.
Finally, make sure your businesses expenses that you write off are actually legitimate expenses. For example; If you take a vacation, and do some work for your business while on vacation, you cannot write your vacation off as a business expense.
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