Online do-it-yourself tax system Turbo Tax put together some common myths people believe about tax audits—and just why these aren’t true for most people. Knowing what is and isn’t correct about audits and what to do if a dispute comes up can help take the word ‘audit’ from a frightening word to an uncomplicated one.
Many fears about tax audits are unfounded and stem from simply not knowing enough about them. We are here to help dispel some of the myths and answer any questions if a tax issue or dispute does come up.
Myth one: officials will show up and seize my assets
In most cases, no one will show up. You likely just have to honestly answer a few IRS questions to clear up some of their records. You may be instructed to send additional money or may be asked to come in and talk with an agent in person to review information.
Myth two: tax audits happen all the time
Audits require a lot of time and resources for the IRS to complete. They often see it as a ‘lose-lose’ situation and only audit about 1 percent of filers. The IRS has systems in place to determine if an audit is worth their time.
Myth three: using a tax professional means I won’t get audited
Using a tax service or professional to file your taxes doesn’t make them mistake-proof. Some tax professionals may even create purposeful fraud on your taxes if you do not understand what you are actually claiming.
Myth four: the IRS targets specific people
Your income doesn’t make a difference to the IRS when it comes to auditing. Many people will also deny taking credits and deductions because they believe it will make them less susceptible to an audit. Go ahead and claim all the appropriate credits and deductions for yourself and your family.
Myth five: If I wasn’t audited right away, I am in the clear
Audits are not always done immediately after you file. The IRS has rights to audit you for a three-year window after the taxes were due to them. If an error seems substantial enough they can even go back six years to investigate.
Audits don’t have to be a scary thing—but if a dispute or tax issue does come up, an attorney experienced in tax laws can help you clear things up.