Most Common Misconceptions About Tax Audits
Filing tax return is an annual activity most of us does not really do happily. Still, it is inevitable, and April 15 each year is the deadline by which we need to submit the tax return. Tax audits are something most people are very afraid of, and there are many myths and misconceptions about it. In this article, we will try to debunk the myths and show you that the audit is, really, nothing to be afraid of.
Why do people dread the audits so much?
People hear a lot of stories about tax audits and their outcomes, and so the stories begin. Even though some taxpayers really receive huge penalties, it is only because they did something illegally.
The stories about these penalties and their payers go from one person to another, and the fear starts spreading, as it usually goes. This causes even those who do everything correctly and legally to be afraid of the audit in case they receive the notice.
Most common myths and truths
Because of the stories told about the audits, there are many myths and misconceptions about them. These are some of the most common ones, together with the reasons why you should not believe them.
Audits are intimidating
As we said, people are really afraid of audits because they have heard all sorts of stories about them. The truth is that you will get the written notice from the IRS where they ask you to provide them with some additional information about your tax return. It happens because of your or their mistake, and mistakes happen. If you keep record of your finances, you will have no problem submitting the necessary documents to the IRS and solve the problem.
Only those with high earnings can have an audit
If you have low and moderate income, you may think that you are safe from audits. However, this is not true. Everyone who files for tax return can be subject to an audit in case something is wrong with the files.
Only businesses have the audits
Some people believe that only businesses are subject to tax audits. This is another misconception that has nothing to do with truth. Tax is paid equally by individuals and business, and everyone who pays tax can encounter an audit if they do something wrong or illegal.
If you file for credits and deductions you are more likely to have an audit
There are many people who do not want to file for credits and deductions because they are afraid that it will increase the chance of an audit. However, this is not true and there is nothing to be afraid of.
If you fill in all the forms correctly and submit them timely, you will not only avoid an audit, but you will also keep the money that belongs to you by law.
You will not have time to prepare for an audit
Many people think that audits happen immediately after you receive the notice. First of all, the audits generally happen around two years after you file a tax return. Even if you receive the letter of notice, you will have enough time to prepare all the additional documents and submit them to the IRS.
If you fill the tax forms honestly and correctly and submit them on time, there is really nothing to be afraid of. Even if the mistake happens, you will have a chance to correct it and avoid paying any penalties to the IRS.