What letter arriving by mail creates the most anxiety for business owners and other taxpayers?

It's the notification from the IRS advising you of a tax deficiency and penalties. Although you may still have to suffer through an audit, Congress recently passed an amended Taxpayer Bill of Rights to protect you from overzealous IRS agents.

According to IRS guidelines, here's how the new law works to protect you:

• Prior to your first meeting with the auditor, the IRS will notify you of how the audit process works and of your rights, including the right to appeal.

• You will also be notified of the tax due, along with any interest and penalties. Thanks to your new rights under the law, you may not have to pay a penalties - if your tax deficiency occurred because you relied on advice requested earlier from the IRS, and you have written instructions from the agency to prove it.

• You will not have to pay interest due if the IRS made a mistake that caused your delay - for example, by providing you with erroneous information.

• At the time of the interview with the auditor, you have the right to end the interview until you've had a chance to meet with your attorney or CPA.

• You can avoid having to appear in person as long as you have a CPA or other qualified professional to represent you during the audit.

• The IRS must make a reasonable effort to accommodate you in regards to the time and place of the meeting.

• You have the right to put the interview on tape or make a record - which could help document your case should you decide to sue the IRS at a later date.

• If you do owe back taxes with interest and penalties, but you cannot afford to pay, you can arrange an installment payment plan for a modest processing fee.

• You also have the right to be represented by an ombudsman from the Taxpayer Advocate's Office, who can issue a taxpayer assistance order if he or she believes that an IRS levy of your bank account or other assets might create serious hardship for you and your business.

• Although the IRS can force the sale of property of higher value than your tax obligation, it can no longer sell items having substantial personal value to you, but only trivial market value, for example, used household goods or clothing.

• IRS collectors can no longer levy a private residence without higher level approval, nor can they seize goods with a sale value that would be less than the expense of their levy and sale.

• The burden of proof has shifted from you to the IRS. If the IRS can't demonstrate that it was substantially justified in its claims, they will have to reimburse you for attorney's fees and other court costs.

• Also, you can sue the IRS and collect up to $1 million on top of your court costs if you can prove that the IRS recklessly disregarded collection procedures in pursuing your assets.

Just as important, the Taxpayer Bill of Rights allows you to turn the tables on the IRS and sue the government if you've been unfairly treated.