The lore of the IRS audit has taken on a life of its own. The fallacies surrounding the auditing process have fostered countless fears in people who simply want to file their taxes and stay off the IRS' radar for another year.
While the chances of being audited are extremely rare, thanks to recent budget cuts to this organization, the IRS still scrutinizes a fair share of tax returns each year. You can calm your nerves if or when you receive a notice by uncovering the truth behind the four top IRS audit myths.
Myth 1: Only the Wealthy Get Audited
Lower income taxpayers often believe that their modest earnings make them immune from an audit. After all, why would the IRS want to audit them when they have such little money to give to the government in return? If anything, the government probably owes them a refund.However, in reality lower income earners are audited with just as much frequency as higher earners. The IRS looks for discrepancies and false information on returns, regardless of how much the filer earns. Returns are also selected at random by the IRS' computers for auditing.
Myth 2: Claiming Multiple Exemptions Leads to an Audit
Some people are afraid to claim exemptions to which they are entitled for fear that the IRS will audit them. Despite the fact that they can get a refund or credit for exemptions such as:- Child care
- Dependent care
- Home Office
- Travel, business, or medical expenses
However, the government does not audit returns that claim exemptions with any more frequency than those that contain no exemptions at all. All people who fail to claim these credits are doing is denying themselves money to which they are legally entitled.
Myth 3: Professionally Prepared Returns Do Not Get Audited
You may think that having a tax preparation company do your taxes for you makes you exempt from being audited. A tax preparer, after all, has undergone extensive training to know how to file your taxes thoroughly and competently.However, the IRS selects some returns at random to audit. Even if yours were prepared by professionals, your returns could still be selected for auditing. Having a licensed preparer do your taxes does not make you any more exempt than someone who files his or her own taxes.
Myth 4: Audits Should be Feared and Avoided at All Costs
People who receive a notice of an audit in the mail may suffer hours of panic and dread. They fear that they will end up owing more money to the government or worse, go to jail for a discrepancy on their return.
However, an audit itself may not be such a fearful experience at all. The agent conducting the session may simply confirm the information on your return and ask for proof of your income or exemptions that you claimed. If you owe money, you will be told to write a check or set up a payment arrangement by visiting the IRS' website.
The entire audit may take only a few hours, if that. You typically can expect to come out of the session with your income, assets, freedom, and dignity intact.
The IRS audit has evolved into a figurative boogeyman that people fear and want to avoid at all costs. While the chances of being audited are slim, you still may wonder if any truth exists behind the most common audit myths. You can stay calm and prepare yourself by reading the new audit guide that is available to taxpayers now.
