5 Myths about the IRS audits
IRS audits are one of the most dreaded outcomes of the whole process of tax filing. This is mainly because of the unsettling mystique around it. Therefore, people are often worried about the IRS agents showing up to your doorsteps with their badges. Another common nightmare of the taxpayers is the agency seizing their personal assets. However, IRS audits are a lot different from this myth. You need not be afraid of the audits. In fact, even the government is not even interested in doing audits. Hense, they are just looking for people who have been lying to the government.
One of the most common misconceptions regarding IRS tax audits is that it is a common occurrence. Audits are a nightmare for the IRS as well. Apart from the resources, the agency also gets a negative image because of the audits. This is why only a small percentage of taxpayers get audited. Discriminate information function is a system used by the IRS. It is a scoring system comparing the returns made by peer groups. These groups are based on factors like job, income, etc. If a taxpayer’s financial data is significantly different from his peers, they get a high DIF score. This increases their chances of getting an audit.
IRS Audits Common Myths
In this blog, we will be busting some of the common myths people have regarding the IRS audits:
IRS Audits are a serious concern
This is a very common myth. This is what makes people desperately fear IRS audits. However, the truth is that, in most cases, you will be responding to just a few questions of the IRS.
Most people when seeing a notice from the IRS, break into a cold sweat. Most of the time it is a simple process. You will just have to give the right documentation for the information you have provided. In some cases, where your money is not adding up according to the record of the IRS, you might have to send some additional money. There will be no penalties and your case will be closed.
Now, out of the three IRS tax audits, a correspondence audit is the common one. It is so subtle that most people don’t even realize that it is an audit. The second is the in-person audit. In this, the IRS agent will be making an appointment with you for reviewing your financial information. Whatever be the type of audit, it is a simple problem. For example, you might have sold some stocks and forgot about it while filing. You might end up getting a refund if you lost money on the sale.
Returns filed by professionals are IRS audit-proof
Even if you made money to a professional for filing your returns, it doesn’t guarantee that you won’t get an audit. Many people believe that using a tax resolution service will ensure maximum tax relief and a mistake-free return. Many of these companies advertise the biggest refund. They get too enthusiastic and end up making mistakes. Some might even engage in purposeful fraud. As a taxpayer, you might not have enough understanding of what you are claiming on the tax returns. This can trigger an audit, penalties, and interest.
Taxpayers with low to medium incomes won’t get IRS audited
In response to the country’s economic woes, the IRS has increased the number of audits. Most people believe that since they don’t earn a lot of money, they are in the clear. However, the IRS audits people from all income brackets. Still, you need to know that even though the level of auditing has increased, the number is extremely low.
Certain credits or deductions can increase your chances of getting audited
People avoid taking certain deductions and credits because they have heard that it increases their chances of getting audited. They are too fearful of the audit that they hand over the money to the government. A big inspirer of this dear is the home office deductions. It is important to remember that there aren’t any automatic triggers for an IRS tax audit.
The IRS audits immediately
The IRS has three years of time after the date of the tax return to audit. For any substantial errors, the IRS can go back 6 years. So, you should keep records for at least that long. Usually, an audit happens in the second half of the time frame of three years. It is because there are millions of people in the country who file returns. Also, there are a million other corporations. So, it takes time to get all the filings done.
There are several other myths about audits running rampant. But it is important to understand what this process is all about. Every taxpayer wants to pay the least possible amount of taxes. This is the same for people working at the IRS as well. When you are filing your taxes, you are making an assertion. Getting audited is just the IRS asking you from where you got this information. You don’t have to stress about it. They are not going to come and take all your money. You have your rights. If you owe money to the IRS, you will have to pay it. However, by complying with the IRS, you can stay assured that nothing is going to get out of control.
Some of the state tax revenue agencies are more difficult to deal with than the IRS. The state is broke and hungry for revenue. So, they might not be as friendly as the IRS. So, you need to be equally careful and diligent while filing the federal tax and state returns.
Should I hire a tax audit proffessional to help me with IRS audits?
Now, even though hiring a professional service won’t make you audit-free, it will surely lessen the probability. With our tax resolution service, the Platinum Tax Defenders, you will be able to get the guidance of the most experienced people in the field. Our tax relief experts can help you get the best return without putting you at risk of an audit. To know more about IRS audits, book an appointment with the Platinum Tax Defenders today!