8 myths about IRS tax audit
Let us get straight to the point; what are 8 myths about IRS tax audit? Many Americans fear been audited by the IRS. And just like with anything that provokes fear, there are many misconceptions and rumors surrounding this tax examination.
Some of these speculations are just false. Let’s look at these legends and find out why we should not believe them.
E-Filing likely to trigger an audit.
E-Filing is by far the norm now, it represents about 90% of all applications. But does it make you more likely to be audited? The IRS does not publish statistics that can definitively answer this question, but we can draw some conclusions from what we know. The IRS said handwritten returns are 20 times more likely to have errors than electronic returns and that mistakes can make a human to take a second look at tax applications. This speaks well for electronic filing. Now the second of 8 myths about IRS tax audit.
2) Amending your taxes triggers audit
IRS strongly rejected this myth. Of course, the second return is well screened just like the first one. Fill out your returns with a detailed explanation why you are making changes, this can prevent a human audit.
3) IRS agents will knock on the door
This is partly myth. Yes, sometimes the IRS schedule an examination at your home or workplace. However, 70% of the audits are carried out entirely by mail. It is also interesting to note that the IRS does not contact taxpayers by e-mail, so every e-mail claiming to be from the IRS auditor is a scam.
The IRS does not use the phone
There is an increase in phone and e-mail based IRS scams. But you can not hang up immediately because the IRS actually contact taxpayers by telephone regarding possible audits, sometimes for the first interaction. If you suspect the caller and should be, take the name and extension number and call the IRS main number: 800-829-1040. Know that the real IRS agents will never ask for a bank account, credit card or Social Security number over the phone.
5) Fewer audits are good for everybody
Nobody likes to be audited, and so fewer audits is a good thing, right? Well, according to the IRS, 12% reduction on audits between 2013 and 2014 cost the federal government some $ 2 billion of revenue. Having less revenue makes it difficult to reduce taxes, which is not a good thing.
Some people have the impression that the use of an extension for filing later increases your chances of being audited. The IRS does not cite factors that can trigger the audit, but opinions are divided on this point. However, a tax lawyer Robert Wood, writing for Forbes believes that the late submission actually reduces the chances of being audited because of the extra time means less rushed and well-prepared tax return.
7) The audits are frightening to experience
Personal finance expert Liz Weston, writing for NerdWallet last month, said Congress restructured the IRS in 1998 in response to complaints about excessive enforcement, ordering them to focus more on the rights of taxpayers and service users. Back in the days, the IRS was this big scary agency that came and took over your house and went through your files, now they try to work with taxpayers. And remember, 70% of examinations are done by mail. Let us read the last myths of this article 8 myths about IRS tax audit.
8) Only the rich get audited
It is true that the richest people are much more likely to be audited. People who earn less than $ 200,000 in one year get audited 1% of the time and this percentage increases with income. But even at the audit rate of 1% per year, you stand a 26% chance of being audited over a 30-year period.