You receive a letter that reads IRS on the cover. There is instantly a feeling that the IRS is to audit you and seize your property. Not exactly! IRS tax audits, in contrast to common notion, are neither commonplace nor as dreadful as you may think. In fact, most taxpayers do not really have to fear from IRS tax audits, as the IRS audits only close to one percent of tax returns every year. Even when the IRS is conducting an audit, many times the purpose is to simply verify a few income details. You can always call The Law Offices of Nick Nemeth to get tips on how to survive a tax audit.
In this blog post, we debunk five myths related to IRS tax audits. Let’s get started.
1. Filing tax returns at the end of year increases the chance of tax audits
The IRS does not consider elements such as the date on which a taxpayer filed their tax return when deciding to audit them. IRS audits, in fact, usually start from July. So, even if you used an extension to file your tax returns, that does not trigger the IRS to audit you. Filing an extension can, in fact, help you avoid a tax audit, by providing you with more time to correctly prepare your tax returns.
2. The IRS does not audit taxpayers with moderate income
While rich taxpayers usually have more chances of facing IRS tax audits, reports show that the IRS also audits taxpayers with low to moderate income. Data reveals that there has been an increase in the number of audits for middle class people. According to Time, even if you earn less than $2,00,000 a year, you have a 26 percent risk of getting audited over a period of 30 years.
3. Taxpayers who file for tax credits and deductions have a higher chance of facing tax audits
False. Claiming and using deductions such as education credits does not mean the IRS will audit you, unless the central tax authority finds some unusual claims, for instance, charitable deductions that exceed your income. Many people fear that a home office deduction increases the chance of an audit, which is untrue. Any long list of deductions does not trigger an IRS audit unless the IRS finds something unusual. If you find yourself confused, call us and schedule a free, no obligation consultation.
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4. E-filing increases the risk of audits
The IRS, in fact, encourages taxpayers to e-file their tax returns, as taxes filed in this way have been found to be 20 times more accurate than tax returns filed on paper. The fact that 90 percent of people e-file their tax returns these days proves that e-filing has no relation with increasing the risk of tax audits.
5. Amending tax returns may trigger an audit
Although the IRS will screen the information any time you amend a tax return, it does not call for an audit. In fact, correcting the mistakes on your tax returns by filing another return can prevent you from the possibility of penalty or interests. The problem may arise if you do not present a correct picture of your income and taxes to the IRS. So, do not be afraid, and when you need to amend a tax return, do take the step.
The IRS has the right to audit any taxpayer they want, but this does not state that an audit would lead to levy on your assets. It is true that if you owe the IRS, they will take certain steps to get their money, however, audits don’t just happen overnight. Even if the IRS decides to audit, you have certain rights to make sure they treat you fairly. The tax lawyers at The Law Offices of Nick Nemeth in DFW can explain your rights and help when it comes to surviving an IRS tax audit. To schedule an appointment, simply call 972-474-0829. You can also fill out our Free Tax Analysis form and we will get in touch with you right away.