The clock starts ticking from the moment a Notice is issued, and your response and appeal options will dwindle rapidly as time goes on.
It is always recommended that you get professional assistance when dealing with a tax matter of any significance. (If you get a notice saying you made an error on your return and you owe them $10, pay the $10 - make it go away.)
A CPA, attorney or enrolled agent is permitted to represent you (with a properly completed IRS Form 2848, Power of Attorney.) By employing a go-between, you avoid "volunteering" information that may be prejudicial to your case, and you can gain time to prepare a response to their inquiries.
A professional also "knows the rules" and can advise you how to support a position on your return, what to do, and what not to do. (If your return is being examined, they'll usually ask for everything under the sun. Unless they have a reason to suspect fraud or other criminal intent, they can't just "go fishing." Their inquiries have to be relevant to the items under examination.)
Keep in mind that you should never lie to the IRS (or the professional representing you) - that just makes it a lot worse. By the way, there is no statute of limitations on an unfiled return. As a matter of fact, if you don't respond to a request to file a return, they'll cheerfully prepare one for you - single, one exemption, no deductions. Then they'll start the collections process...
What about the TV ads that claim, "The IRS said I owed $50,000 and [insert name of company here] got 'em to settle for $50!"?
There's just one little catch - that only happens when you can prove that the IRS really did make a mistake. I have represented clients with that situation, too - they really didn't owe what the IRS said they did. It cost some money (less than what the IRS wanted) to prove the IRS wrong, but we did. But if you really do owe the taxes, the IRS and state will go after you tooth and nail. (You might actually be able to work out an offer in compromise, but the IRS will only agree if they're convinced there's nothing they can seize, and there's no way you'll ever have enough money to pay them in full.)
It is possible to get some penalties abated, but you have to meet the conditions to qualify.
If you have concerns in this area, please give me a call - unless you're in the criminal/fraud investigation category - in that case, call a tax attorney. Quickly.