Getting a letter in the mail from the Internal Revenue Service is never a good day for anybody. After all, this is an organization that is set up specifically to take money from you.
However, there are many myths about tax audits that are created out of thin air, most of which encourage more fear than is truly necessary.
Myth: All tax audits are a matter of life and death
The truth about most tax audits is that they are a discrepancy of records. In many cases, the IRS is simply stating that its records do not show the same thing that you reported on your tax forms.
If it is a case of a mistake on their side, you send in the information, and you never even have to come in to see an agent.
Myth: 10% or more of people are audited in any given year
The truth is that less than 1% of people in any given year are audited. The IRS does not keep a tally on the percentage of people that it audits in any given year.
If there are more people who do not keep appropriate records, the more people will be audited that year. If there are less people that do this, then less people will be audited.
There is no such thing as an “audit quota.”
Myth: Having a professional file your taxes for you makes you completely audit proof
The truth of the matter is that you are responsible for all records that have your name on them no matter who files them.
Your professional filer may offer some sort of insurance for help with your representation if you get audited, but the final responsibility falls on you to correct any discrepancies in the records between you and the IRS.
Myth: If you keep your income below at certain threshold, you will not get audited
The IRS has been hiring more people to conduct more audits because of the discrepancy that it is found with records in the past.
However, many people believe that most of these agents are looking for people above a certain income threshold. This is not the case.
Additional audits are being conducted across the board, and just because you do not burn above a certain arbitrary threshold does not mean that you cannot be audited by the IRS.
Myth: If you file for certain deductions, you stand a better chance of being audited
Many people do not take deductions to which they are absolutely entitled because they believe that taking them will raise some sort of “red flag” with the IRS.
The truth is that any deduction that is in conjunction with the law is a deduction that you should take. IRS agents do not determine an audit simply based on the name of a certain deduction.
If you understand the true nature of what IRS audits are meant to do, you will realize that they are nothing to be scared of. Make sure that you keep all of your records as thorough as possible and report according to the law as closely as you can.
If this is your method of filing taxes with the IRS, then you will certainly be able to handle any queries that they may have about your records even if you do get audited at some point in the future.
Photo: James Morris / CC 2.0