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I've settled twice with the IRS and on my own terms, not theirs, meaning I paid what I owed, not what the auditors initially said I owed. But I wasn't tried to cheat in the first place, and my records were impeccable.

The first time, in 2004, the amount in dispute was $465,000. The final settlement was $17 dollars (or something similar). Just recently, they came after me again, this time for about $3,500, but once I re-did my return and corrected their mistakes (and mine), they settled with a zero change in more taxes owed.

My experience with the IRS, is that, by and large, they are honest, decent people trying to serve the public within the training and guidelines they have received. It's when matters and numbers get outside of their expectations that misunderstandings arise which get further complicated if the return contains its fair share of the inevitable errors (in both directions, their favor and yours) one makes with complicated returns involving hundreds of transactions such as any active investor will have.

But if you can provide the documentation they are legally required to ask for and have a legal right to see, then a settlement is a straight-forward matter (even if the docs run to 236 pages, as they did in my 2004 tussle with them).

So my advice is this. Don't be belligerent. Ask what they need to see and then provide it. If a person is filing an honest return, he/she will be dealt with fairly and doesn't need a lawyer, accountant, etc. Their published rules can be deciphered and followed by "ordinary citizens". All that is required is patience, common sense, and honesty.

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