Tax audits are a favorite topic for urban myths. Here’s the truth behind the hype:
A Tax Audit Is Intimidating: Unlike the grill sessions you’ve most likely seen on TV, most IRS audits are correspondence audits: you’ll receive a notice requesting additional information or clarification of information on your return. You provide the needed documentation, the revenue agent or clerk reviews it, and case closed.
Definitely not the sleeves-rolled-up interrogation session of urban myth!
You’ll Get Audited Right Away: In most cases the IRS will abide by the three-year statute of limitations–unless the return in question has substantial errors.
It can take a year or more for the IRS to wade through the millions of tax returns it receives before it determines your return is worth a second look. In the case of more complex returns with substantial errors, the IRS may reach back six years.
Tax experts suggest keeping tax records (income documentation, income/expense records) for up to six years for this reason.
Professionally-prepared returns are audit-proof: As much as we’d like to think this is the case, it’s not. If your tax preparer embellished your return, provided incorrect information, or attempted to claim deductions for which you’re not eligible, the IRS can and will come knocking.
Find a tax pro with an established track record in your community and who is good standing with both the IRS and the Better Business Bureau. Online review sites such as Yelp and Google are also helpful, along with recommendations from friends and colleagues.
Tax audits are common: Given the sheer volume of urban myths and audit-related horror stories, it’s safe to assume that tax return audits are common. The good news: only an average of 1 in 116 taxpayers will undergo a tax return audit.
Low-to-moderate earners won’t be audited: If you’re among those in the lower income brackets, this myth might be music to your ears. It’s just that: a myth. Unfortunately, an audit is an equal opportunity headache.
The IRS takes into consideration(among many other factors) the accuracy of the information on the tax return, not the taxpayer’s income status.
Certain deductions will trigger an audit: Have you heard the one about home office expense triggering an audit? Educational expense deductions or dependent care deductions? The good news is that certain deductions will not trigger an audit.
The IRS will, however, pay close attention to returns that are suspicious, inaccurate, or “beyond common sense,” so it pays to file an accurate and truthful return each year.
Tax season is fertile ground for rumors, urban myths and other scary stories surrounding tax returns and tax audits. The good news is that they are just that: urban myths and scary stories.
If you are in among the 1 in 116 to be selected for audit, chances are you will be facing a correspondence audit. Respond promptly to all requests for information, and when in doubt, enlist is a qualified tax pro.
We have IRS Enrolled Agents and tax attorneys on staff who can help. If you’re facing an audit or other serious tax matter and would like a tax pro by your side, get started today by scrolling to the bottom of our homepage and clicking the blue “start secure chat” button.
