The IRS is a popular target for urban myths that seem to have taken on a life of their own. It would stand to reason that people just want to file their taxes and get on with their lives, content to keep the IRS at bay by doing so. The good news is that IRS audits are less frequent than they used to be, thanks in part to budget cuts, and the staffing reductions that went with them.
The bad news is that almost anyone is at risk of an audit since the IRS randomly selects returns for audit. Even with the budget cuts and staffing reductions at the IRS some audit myths persist. Here’s a look at some of the most popular myths, and the truth behind them.
Myth: You’ll Get Audited If You Claim Multiple Exemptions. If you’re afraid to claim the exemptions to which you’re entitled, you could be cheating yourself out of a refund or tax credit. You could me missing out on a refund or tax credit for any of the following:
Travel, business, moving, or medical expenses
Fact: The IRS doesn’t audit returns with exemptions any more often than it audits returns without them. By not claiming the above exemptions, you could be denying yourself money to which you’re legally entitled in the form of a tax credit or a larger refund.
Myth: You’ll Get Audited If You’re Wealthy. If you’re a low-to-modest income taxpayer, you may think you’re in the clear. After all, why would the IRS go after someone who earns very little and who has little to no money to hand over to the government, right?
Fact: The IRS screens for false, misleading, or missing information on all returns, regardless of how much the taxpayer earns. The IRS selects returns at random.
Myth: You Won’t Get Audited If A Tax Pro Does Your Return. It’s easy to fall for this myth because tax return pros have extensive training in tax procedures, tax codes, and tax law. If anyone can get you out of an audit, they can, right?
Fact: A professionally-prepared return is no less vulnerable to an audit than a DIY return. Since the IRS selects returns at random, a professionally-prepared return is just as vulnerable to audit as a DIY return. While a tax pro can do a great job of thoroughly and accurately filing a complex tax return, that return is no less vulnerable to an audit.
Myth: Avoid an audit at all costs. Don’t respond to audit notices or any correspondence from the IRS. If you get audited, you’ll end up in jail in some cases.
Fact: Nothing can be further from the truth, especially the myths surrounding jail time. What will happen if you ignore IRS notices, however, is the IRS will be less willing to work with you if they have to hound you into responding.
If you do get an audit letter from the IRS, follow all the instructions on the letter, including instructions for submitting documentation or for reaching the IRS. Chances are, you’ll just be asked to clarify or confirm some of the information on you return, or to provide documentation supporting your claim of an exemption or deduction.
If you do end up owing money to the IRS, you can make payment arrangements if you’re not able to provide payment in the full amount.
Regardless of the outcome, an IRS audit is nothing to fear or avoid. While it’s certainly not anyone’s idea of fun, it’s not the torturous process you hear about in myths and rumors. Whatever you do, don’t duck the IRS.
There are many urban myths and horror stories surrounding an IRS audit. By arming yourself with the facts, you can determine which is truth and which is fiction. While budget cuts and staffing reductions have hit the IRS hard; they are still randomly selecting returns for audit regardless of your income level and whether or not your return was professionally prepared.
Whatever you do, don’t duck the IRS if they should come calling. Enlist a tax pro if you’re unsure of how to respond to an audit notice.