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Common Myths About Tax Audits!

Like many other things that provoke anxiety, IRS audits are connected in the common imagination with a web of rumor, mythology, and speculation—a web that the IRS feeds by being notoriously secretive about its audit procedures.

Some of these beliefs are untrue, having been debunked by experts or even denied by the IRS. Other audit legends are nearly challenging to rule out—or verify, for that matter—and hence should not be used to make tax-paying judgments.

An Audit Is Triggered If You Amend Your Return

The IRS officially debunks this misconception. Of course, just like the first, your second return is checked. Even if the algorithms flag your return, TurboTax claims that completing your 1040X with a detailed explanation of why you’re updating can help you avoid a human audit.

Audits Are More Likely To Occur If You Fill Electronically

E-filing is currently the de facto standard, accounting for over 90% of all returns. But does it increase your chances of being audited? Although the IRS does not provide information that can give a conclusive answer to this issue, we can make some generalizations from what we do know. According to the IRS, handwritten forms are 20 times more likely than e-filed returns to contain errors, and mistakes necessitate a human review. This is a strong argument in favor of electronic filing.

IRS Doesn’t Use The Phone

There has been an increase in IRS phone and email frauds. However, it would be best if you didn’t hang up immediately since the IRS calls people about possible audits—sometimes even for the first time. Also, never give up your bank account, credit card information, or Social Security number over the phone to an IRS representative.

IRS Officials Will Arrive At Your Home

This one is based mainly on legend. Yes, the IRS may conduct an audit at your home or business. However, 70% of audits are completed totally by mail. It’s also worth remembering that the IRS does not send emails to taxpayers; thus, any email claiming to be from an IRS inspector is either spam or a hoax.

Late Filing Puts You In Danger Of An Audit

Some individuals believe that filing late and requesting an extension increases your chances of being audited. The IRS does not list the circumstances that can lead to an audit, and there is disagreement on this point. However, we believe that filing late reduces your chances of being audited since the extra time allows for a less hurried and more fully prepared tax return.

There Will Be More Audits If There Are A Lot Of Deductions

Taking a lot of deductions does not mean you’ll get audited. The scanning system compares your return to others with comparable characteristics, and yours may stand out if you take certain unusual deductions, like charity deductions that exceed your income. A large number of legitimate deductions, on the other hand, isn’t enough to raise suspicion.

Everyone Benefits From Fewer Audits

Nobody likes being audited, so fewer audits must be beneficial, right? According to the IRS, the federal government lost $2 billion in income owing to a 12 percent decline in audits between 2013 and 2014 (due to the agency’s decreasing budget). Less revenue makes it more challenging to lower taxes, which is not a good thing.

Conclusion

Hopefully, removing these typical audit mistakes will allow you to concentrate on the work at hand—managing your organization. When submitting your tax return, do your best to report everything accurately, retain your records for at least six years, and remember that the IRS only audits a tiny number of returns.

Don’t freak out if the unthinkable happens and you receive an IRS audit notification letter. It’s not the kind of nerve-wracking experience you’d expect from a nightmare.