There are many misconceptions about tax audits, making it the most dreaded experience for businesses and individuals. During tax seasons, reality hits people who are behind on their bookkeeping or who later discover that IRS regulations and forms are too strenuous for them to traverse. Many tax professionals often explain the most common phobias their clients share with them involve audits. They worry that late fillings, certain deductions, or the use of a tax preparer will trigger an audit. But far from it, IRS isn’t out to pursue people who have made two or three mistakes and punish them with horrible fines. For starters, audits are routinely either done by a computer-based algorithm looking for abnormalities or are randomly selected. Besides, as a taxpayer, you have copious well-documented rights. As long as you maintain a competent record-keeping system and take appropriate deductions, you don’t need to lose any sleep over it.
- Be Anxious About an Audit.
The most imminent misconception suggests that the audit exercise should be gravely apprehended. But that should not be the case. There are only two tax audits carried out by the IRS, and they include the in-person audit and the correspondence audits. The IRS’s most common tax audit is the correspondence audit, and people may not even grasp that it’s an audit. In this audit, the IRS sends out a notice or letter, and people need to answer a few queries. Normally, the IRS will ask you to send another tax payment or confirm your information. In the in-person audit, an IRS agent will make an appointment with you to go over particular financial information. Experts say that a great deal of time, it’s a straightforward problem to solve.
2. Returns Filed by a Professional are Audit-proof.
A retired financial coach, Tim Clegg, affirms that filling your taxes through a tax preparer may not prevent you from being audited. Tim has guided Volunteer Income Tax Assistance plans for more than ten years, affirms that he has known many folks who thought professional tax service assures a mistake-free, solid return. Tim continues to explain that the way these agencies compete is to guarantee you, the client, the biggest refund on your return, and in doing so, they end up screwing up. In low-income neighborhoods, many of these tax professionals are committing purposeful fraud, Tim said. And such steps can set off an audit and stiff penalties.
3. Moderate to Low-income Earners don’t get Audited.
According to Thomas Jensen, a financial adviser, the number of audits has been ramped up recently due to the nation’s economic woes. This means that people with low to moderate-income should not think they’re clear and safe because their income is low. Because now audits are done across the board, and Jensen also added that the IRS has been employing more people to do more audits to all taxpayers’ levels. Even though the number of audits has increased exponentially, it still represents a small percentage of filed returns. For people that have this moderate to low-income earners that need their tax refund right away they can get a tax refund loan. There are some great sites that offer these emergency tax refund advance loans online.
4. The Chances of Audit Increases if you File for Certain Credits or Deductions
Tim says many people deny themselves tax advantages, which they qualify for by not taking certain deductions and credits because they have heard or believe that it increases their chances of an audit. An audit’s phobia makes many people not claim certain deductions such as a home office or parent’s relief tax.
Thus, they end up not getting the money they are entitled to, which will go to the government. Experts say that the initiations of an audit are not automatic and inevitable. They continue to say that a person is normally audited if tax returns are beyond common sense or atypical. They are no reason behind fearing for an audit because you can explain your circumstances to the IRS.
5. Audits are Done Instantly.
Audits don’t happen immediately, they happen according to the decree of limitations, and this is usually three years following the due date of filing the return. The IRS stipulates that you must keep your documents secure for six years because it can go back that long when looking for substantial errors in filing taxes. Also, experts agree audits usually happens in the latter half of three years after filing.