Money Management
Tax Audit Myths and Scams You Should Know About
If you asked random Americans to make a list of the things they were most afraid of, getting audited by the IRS would likely land in the top ten. This fear of audits has caused many of us go out of our way to make sure we avoid them. However over the years things have been exaggerated that make these audits sound worse than they are or distort the truth about what the IRS is looking for.
Recently Money.com highlighted some of these tax audit myths and what you know should know about IRS audits:
Myth #1: Phone calls claiming to be the IRS are all scams
This one is a little tricky as tax scams have increased over the years with many citizens growing wise to such tricks. Many of us now assume that the IRS would never really call you in the first place. However that’s not exactly the truth.
It is actually possible that an IRS agent may contact you via telephone. That being said it’s perfectly acceptable to be skeptical about these calls and, honestly, you should be. To make entirely sure that the person you’re speaking with is legitimate you can ask for their info including their name and extension number and then call the toll-free IRS hotline to confirm this information. You should also be aware that these agents won’t ask for your banking info or social security number over the phone, so don’t give that information away to anyone. Additionally, while they may make phone calls, one medium the IRS does not use is e-mail so feel free to file electronic audit messages away as spam.
Myth #2: Auditors will show up at your door
When people imagine what it’s like to get audited they probably envision someone showing up at their doors with a badge and a briefcase asking to see all of their files. While it may eventually become necessary for the IRS to schedule (the keyword being “schedule”) a time to look through the documentation you have at your home or business the majority of audits are actually conducted through the mail. In fact 70% of all tax audits are completed entirely by mail so there’s little need to worry about an agent popping up on your doorstep.
Myth #3: E-filing, amending returns, and filing extensions can all trigger audits
First off 90% of tax returns are now filed electronically so there’s little reason to think that e-filings are more audit-prone than mailed-in returns. Next, in regards to amended returns being red flagged, the IRS has said that this isn’t true. That being said it can’t hurt to include a thorough explanation of why you need to make the changes. Lastly when it comes to filing extensions there is no clear indication that this could increase your chances of being audited. If anything some lawyers say it could indirectly help you avoid an audit since you’ll have extra time to make sure your return is done correctly and not rushed.
Myth #4: If you don’t make much money you won’t get audited
It’s true that those who make more money have a higher chance of being audited. However that doesn’t mean that lesser earners are completely out of the woods. Those who make less than $200,000 a year are still audited 1% of the time. While that might not seem like much compared to the 16.22% that multimillionaires are audited or even the 3 .62% chance those making over $500,000 have but it’s certainly impossible.
IRS tax audits not only happen but also happen to people in many different tax brackets. On the other hand they may not be as intense and scary as some have made them out to be. While you should still be aware of these tax audit myths remember that the best way to avoid an audit is to make sure you file a complete, accurate, and honest tax return.
