While audits are just a way for the IRS to review whether or not taxpayers are filing taxes accurately, the myths related to audits scare most of us.
These myths can evoke fear and anxiety in many as they think they’re going to experience financial ruin.
However, once these myths are resolved, you can see that IRS audits are not that bad after all. Every taxpayer needs to learn about these audits to ensure they are confident and prepared for an audit.
This article aims to debunk 5 IRS audit myths and shed light on the truth behind them. Keep reading!
1. Only the Wealthy Ones Get Audited
Let’s start with the most common myth that IRS audits target only the wealthy.
While it is true that high-income taxpayers are more likely to attract IRS audits due to their complex financial affairs, wealth is not the only factor in determining who will get audited.
Every business and individual can be subject to audits based on different triggers. The IRS not only makes random selections but also selects candidates based on red flags in their tax returns and unusually large deductions.
Thus, saying that the IRS targets only the wealthy is untrue. No matter your income bracket, you can’t be immune to these audits.
2. You Can’t Avoid An IRS Audit
Once a letter from the IRS regarding the audit has arrived, there is no going back. However, you can avoid such a situation from occurring.
Avoiding an IRS audit can become easy if you develop a habit of maintaining detailed records of your income, expenses, as well as deductions. Also, seeking professional tax advice and taking their help accurately and timely can further decrease the chances of an audit.
Moreover, you need to be aware of the audit triggers. Even after this, if you find yourself facing an IRS audit, do not delay your response and approach it correctly to reach a favorable outcome.
3. Filing an Extension Increases Your Risk of Being Audited
Another myth that leads people to rush and file returns inaccurately is that asking for an extension can increase the risk of being audited.
In contrast to this popular myth, filing extension does nothing more than provide you extra time to do accurate calculations without any unnecessary stress. It also helps in avoiding penalties for late filing.
However, while extensions won’t become the reason for the audit, other factors such as inaccuracies or red flags can increase the risk of an IRS audit.
Thus, as long as you have filed your taxes accurately within the extended deadline, there is no reason to fear an audit.
4. An Audit Means Financial Ruin
Do you also picture yourself requesting the IRS agents not to take away your possessions while doing an audit?
If yes then you’re only being dramatic.
While these audits can be stressful and time-consuming, their purpose is not to shatter your life. These IRS agents just want to ensure that you’re filing your taxes accurately. Any error that could be found can be resolved through communication.
Moreover, you have rights as a taxpayer to negotiate payment plans. Errors in your file can attract penalties and legal consequences but seizure of property is the last option only if someone is suspected of committing a tax fraud.
5. IRS Audits are Stressful
Yes, we know audits are stressful but you can minimize this stress by being prepared for what’s going to come.
You don’t believe us? Ask taxpayers who properly prepare documents, file taxes accurately and take support from tax professionals, how easy it is to go through this process of an audit.
You must start by staying organized, cooperating with the IRS and being confident. Also, keep all the documents handy to prove your innocence.
Conclusion
If not all, this article may have freed you from some stress of audits. All the myths associated with an IRS audit make it appear complicated and stressful.
However, as soon as you debunk these myths, you will realize that these audits are for your benefit as well because they ensure you’ve not made an error while making any calculation.
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